Choosing the right business structure is one of the most important decisions you have to make as a business owner. Your business structure will determine your legal liability, how you pay for taxes and with whom you can share the management of your company. One of the different available business structures is the limited liability company (LLC). This type of structure can benefit the members of medium and high-risk businesses in three different ways.
Protects you from personal liability
An LLC is a mix between a partnership and a corporation. Like a corporation, an LLC is a separate entity from its owners. Hence, the shareholders or partners are not legally responsible for the company’s debts or lawsuits. With an LLC, your personal assets won’t be at risk if your company faces the unexpected.
You can save on taxes
Partnerships and limited liability companies are alike regarding taxes. Like in a partnership, in an LLC, you can pay a lower tax rate because you can choose not to be taxed by the IRS as a separate business entity. Instead of your company paying for taxes, the LLC’s members would report the income or loss of the company on their personal tax returns.
Flexibility in the company’s management
A limited liability company could be the right choice for your business if you want to manage it with other members. There is not a maximum number of members in am LLC, and the members can be partnerships, companies, and even trusts. Another benefit of LLCs is that the members don’t need a board of directors to manage the company, as they can do it themselves.
The right business structure
Establishing an LLC can be a good way to save on taxes and eliminate your liability as an owner. However, you must know that every business structure has its benefits and unique characteristics. The right one for your business will depend on your specific wishes and circumstances.