Running an "LLC" comes with specific ups and downs. However, the advantages outweigh the risks when run properly. It's a unique company model that makes provision for setting up a business as a separate legal entity. It means that you have no personal legal obligation when things go south in the firm. Keep reading to learn more about this company model and its advantages.
LLC: A brief overview
Before looking at the benefits, it's pertinent to comprehend the meaning of “LLC”. It's an acronym that stands for "limited liability company." This company model is typically exclusive to the US. It's a hybrid setup that combines the features of a single-ownership and group business. This means that an LLC neither runs as a privately owned entity nor meets the legal ruling that applies to group corporations.
You can form an LLC with one person or a group of people known as board members. To get started, you must select a unique name and address and obtain a registration form. Additionally, you are expected to have a registered agent that receives legal documents on behalf of your firm. The last step is to sign and submit the form and then create an operating agreement.
Other necessary steps are taken after successfully opening the account. These include opening a business account and getting an employer identification number. Here are the benefits of this unique company model.
Personal liability protection
This is the most important benefit of running this company model. Typically, all personally owned assets are safe from whatever happens with the company. This gives owners a sense of peace and safety. Any debt or liability arising from the business doesn't fall on any individual's private assets.
Another crucial advantage of this business model is that you get to avoid double taxation. This means that you pay tax only on company profits and not on immediate personal income. If you run a typical partnership or corporation, you have the obligation to pay tax on company income; then each shareholder will also pay on their own income. In the long run, you get to retain more profit within the company.
The paperwork involved in opening and operating this company model is less compared to what is obtained in a typical group business. The paperwork even becomes less if you have a legal representative, as they'll handle a huge chunk of your paperwork-related activities.
A firm with LLC status has some credibility and recognition compared to other company types. This is because customers tend to trust companies that have adequate legal backing in case of complaints or dissatisfaction. Additionally, since a firm with LLC status usually comprises board members who make decisions together, customers find this more attractive for business. In the long run, more confidence from customers equals higher profit margins.
A final word
To sum it up, if you wish to enjoy the advantages of running a business alone and operating it as a group, then opening an LLC is probably the best way to go. However, it is crucial to seek adequate counsel and professional assistance before, during, and after opening one.