Operating a business in an intelligent way is often a matter of looking for the method of operating that allows you to have the least liability for the greatest amount of potential control and financial gain. While recent and past corporate legal cases have shown that straying too close to the wrong side of the law frequently leads to lengthy jail sentences or prohibitive fines, knowing what you can do within the law can put you in a position of real strength. For those wondering whether to set up a limited liability company (an LLC), here are some hints to help you decide.
1) Businesses are hard to operate without some level of credit. As much as possible, people like to run a business debt-free, and this is simply sound business sense. However, in the likely scenario that you need some level of borrowing in order to get off the ground or move to the next level, being an LLC will smooth the path with a bank. The more options you have regarding funding, the less your bottom line will suffer.
2) As borrowing is generally hard to avoid in a recently-created business – in most people’s cases it will be essential in order to meet initial costs in the absence of an operating profit – there is a consequential danger of credit repayments not being met if the company doesn’t get as much business as you had hoped. In the case of an LLC, you as a person are not responsible for the company’s debts, so your own bank accounts, the family’s bank accounts and your home are not at risk.
3) Setting up as an LLC creates clearly marks codes of practice for the people involved. As a partner within an LLC, you will be under no illusions as to what is expected of you. Business partners are often liable to have disagreements over who was responsible for what. A well-run LLC negates the possibility of this.
4) Compared to a corporation, an LLC has greatly reduced administrative requirements and time-consuming paperwork. It is often said that in business, time is money. Rather than spending time – and consequently losing money – carrying out required administrative busywork, you could be making your business more profitable from your home. An LLC allows you this freedom.
5) LLCs benefit from a great deal more flexibility regarding taxation than many other organizations. The nature and structure of your business will define what your best options are regarding taxation, but being an LLC will allow you to choose how you pay taxes as a company. This enables you to give yourself the smallest tax burden possible – something that can be the difference between a company managing to see out the tricky first few years and one that is going under.
There are various advantages and disadvantages to operating as an LLC. It is certainly worth seeking some legal advice in the early stages of your company’s operation, because a small investment up front can spare you the shock of a large bill in the future.
Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.
Melissa Gordon is the publisher of LegalBuffet.com, a complete online resource that compares the legal services offered by various online companies. Find the best company for your
LLC formation needs at
http://legalbuffet.com/llc-services/.
