Minimize Personal Liability and Build Greater Reputation with LLC
The first step in the process of starting a business is that of entity formation. However, when deciding
on entity formation, two factors are highly important namely,
● The type of business being created, and
● The extent to which the entity will protect its principals from personal liability
In the US, the most basic and the most common forms of business entity formation or ownership are
1. Sole Proprietorships
3. Limited Liability Companies or LLCs
Of these, LLCs are an excellent option for entrepreneurs looking to minimize their personal liability
and build greater reputation, credibility and brand name. LLC is highly flexible, and can be used for a
various types of nature of business. Depending on state law, an LLC can have the same limited liability
for members as a corporation, or have some members with limited liability and some without limited
liability or no limited liability for any members. Unlike corporations, some States require that their LLCs
designate a date in the future at which the LLC will automatically dissolve. Some States also require that
if a member dies, goes bankrupt, or meets some other calamity the remaining members of the company
must either dissolve or vote to continue. Here is a look at some of the advantages of forming a Limited
Liability Company (LLC).
● Personal Asset Protection
LLCs allow owners to separate and protect their personal assets. In a properly structured and managed
company, owners should have limited liability for business debts and obligations.
● Additional Reputation and Credibility
Adding “LLC” after your business name can add instant authority. You may lose business from
customers, partners or vendors if you are not incorporated.
● Name Protection
In most states, other businesses may not file your exact LLC name in the same state. This can give you an
exclusive name of doing business within your state.
● Perpetual Existence
LLCs continue to exist, even if ownership or management changes. Sole proprietorships and
partnerships just end if an owner dies or leaves the business.
● LLC Tax Flexibility
Through profit and loss typically pass through an LLC and are reported on the personal income tax
returns of the owners, an LLC can also elect to be taxed as a corporation.
● Deductible Expenses
LLCs may deduct normal business expenses, like salaries, before they allocate income to owners.
Since tax situations change over time as a company grows and becomes more profitable, enterprises
must seek the services of professionals who can advise on the LLC tax return.
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