Why Set Up an LLC – Limited Liability Corporation?
The LLC or Limited Liability Corporation is basically a form of business where the owner of the business is granted protection from the liabilities of a business. With an LLC, the business owner also receives tax benefits of larger registrations of businesses like partnerships or incorporations. To register as an LLC, the business has to get the articles of organization prepared to be filed with the state the LLC is to be registered in.
You will have to pay some fees when registering a business as an LLC. However, unlike other corporations, there is no need of having a lawyer present when registering an LLC. This proves to be advantageous to the smaller businesses that cannot waste time nor cash waiting for and hiring a lawyer. If required, you can get some advice from your lawyer and accountant in the process of registering your business as an LLC. But they need not be present at the time of registration.
In addition to providing tax advantages and a limited liability, an LLC is flexible when in the process of creating a management and ownership structure. LLCs gain tax benefits through pass-through taxation. With this, all profits that the business acquires is taxed only once. Owners of the business need not pay either corporate or personal income tax for the profits earned via the business.
With an LLC, the owner is limited with its liabilities to the tune of the amount that they had placed in the business. However, all debts and responsibilities that are in excess of these amounts are considered to be the corporate entity’s liability, and not the liability of the ownership group.
Another advantage the limited liability company has over incorporations is that it has the flexibility of developing its own management structure. The law states that all corporate businesses have to have a specific number of officers with them, and that the Board of Directors have the responsibility of reporting to its shareholders. This law in fact makes it a bit difficult for the owner to diversify the running of the business, and make a profit at the same time. However, this is not prevalent in LLCs.
The final advantage of LLCs over other corporations is that it is a much easier company to operate. The LLC does not have many requirements for reporting its operations to states and all related regulatory bodies. It is not even required to have a Board of Directors or an Annual General Meeting in an LLC. However, it is actually better to have a meeting once a year in an LLC.
These are all the advantages a limited liability company has over other corporations. And it better suits for smaller businesses.