Choosing a legal structure for your new business can be a struggle, given that you have several legal structures to choose from. LLCs are a common choice for entrepreneurs because they can provide tax benefits and asset protection.
If you are considering an LLC structure for your new business, Forbes asserts that an LLC is beneficial. Before choosing your structure, ask yourself the following three questions.
Do you want flexible taxation?
When you have an LLC, you can apply for treatment as an S-Corporation. This means that your self-employment taxes do not come from any distributions paid to you or other LLC members. These taxes apply to salaries and wages. Your business’s profits and losses end up on your members’ personal tax returns. So, if you do not make a profit, then you can lower your income tax obligation.
Do you want asset protection?
LLCs are corporate entities that are separate from the person who owns the business. For businesses that are not LLCs, business litigation is personally devastating. For instance, if a person seeks legal action against your business, you could lose your home, your car and other assets in order to pay for the litigation. When you choose an LLC, then the only assets at risk belong to your business.
Do you want credibility?
While you are still credible as a sole proprietor, you have even more credibility as an LLC. When clients, vendors and other prospects see LLC at the end of your company name, they may look at you like a more respectable or trustworthy company.