Business Law 101: 5 Benefits of Registering as an LLC

So you’re getting ready to start your own business — Congratulations! This is a huge step towards achieving your professional goals. But before you get going, you need to make sure that you register your business in the form that fits it best. Although there are many ways you can register, the Limited Liability Company (a.k.a. The LLC) is arguably the most popular and the most favored one of all. There are many reasons why the LLC is ranked highest on the list, and below we discuss the main benefits of an LLC over any other kind of entity.

 

  • Limited liability

Perhaps the most popular reason is that an LLC shields you from any personal liability should anything go wrong. In other words, business owners enjoy protection from any present and future liabilities or judgments against the business without having to incorporate. It is much less risky than other entities like a sole proprietorship and a general partnership. It’s for this reason that new companies so often set themselves up as an LLC. Starting a new company is risky enough, let alone having to worry about whether your personal assets can be targeted.

 

  • Avoid double taxation

Another big benefit of an LLC is that business profits are not separately federally taxed. All of the profit passes through to the members, and is filed on each individual’s tax return. This is also referred to as “pass through taxation.” Double taxation usually occurs when there is a C-Corp structure and means that the company and the owner are both taxed separately. An LLC prevents this, adding this more appealing tax structure to the list of reasons why an LLC is a preferable business entity.

 

  • Flexibility

Unlike corporations and partnerships, an LLC is much more flexible in terms of how it operates. Upon setup, the founders create an Operating Agreement, which can decide how the business is going to be run. An example of this flexibility is that you might decide that you want to distribute profits in proportions to your members rather than as investment percentages. Another advantage of this flexibility is that an LLC doesn’t have restrictions on the type and number of partners the way other entities do. It’s so flexible that your members can even be foreign nationals or other companies and there is no limit on the maximum number of members.

 

  • Involve all of your members

One of the biggest advantages of an LLC is that all members are protected from personal liability. In other business entities, if a member wants to limit their personal liability, it can mean that they are no longer allowed to participate in the management of the company. This is in contrast to the LLC, where every member is protected without restriction on their ability to manage and participate in the LLC.

 

  • It’s easy to run and make changes

An LLC is also much simpler to run than a corporation. Corporations require lots of formalities like a board of directors, officers, regular director’s meetings, and shareholder’s meetings. An LLC doesn’t require any of these things. Another advantage is that you don’t need to get approval from a board of directors before taking business action. Not having to jump through all of the hoops and appease the different groups makes running an LLC much easier on business owners.

Lastly, the LLC structure is ideal because once you have set it up, there is very little continual maintenance that needs to be done and it’s easy to make changes like adding new partners, selling interest in the entity, or even changing to another entity altogether.

Contact Integrated General Counsel

At IGC, we know how important it is to choose the right business entity for your company. If you are setting up a business and need help determining the best structure for your company, don’t hesitate to contact or call us at (925) 399-1529 (1LAW) today.

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Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.