You started your small business from scratch on a shoestring budget, and it’s been growing steadily ever since – and you think it may be time to change from a sole proprietorship to something more structured. Is a limited liability company (LLC) right for you?
It could be. LLCs offer some significant benefits for many small business owners. The top four benefits of an LLC are:
As a sole proprietor, you and your business are legally indistinct. If something happens to provoke a lawsuit against your business or your business runs into other financial trouble, your personal assets could also be at risk.
An LLC creates a safety net that limits your personal liability against your business creditors, which can protect things like your car, your savings and your home.
One of the reasons small business owners hesitate to move away from sole proprietorships is that they’re worried about tax complications.
With an LLC, you retain “pass-through taxation,” which means that you would still be able to report your business profits on your personal taxes – and those profits would be taxed at the personal income rates.
You may not have a need for a business partner today, and that’s okay – an LLC can be operated by one person. However, as your business grows, an LLC can accommodate partnerships with others without massive changes in structure or organization.
Sole proprietors often find it difficult to obtain investors or bank loans. The formal structure of an LLC can help boost your company’s credibility and make you eligible for financing you might otherwise not have.
When you’re lost in the weeds with your business formation, don’t be afraid to reach out for legal assistance. That’s the best way to meet the challenges of the present – and the future – with ease.