There’s plenty of allure to starting your own business. The entrepreneurial spirit, the pride of ownership. But how you start your business is as important as why. Starting your small business as a limited liability company, or LLC, offers benefits that operating as a sole proprietorship does not. Some may be intimidated by the idea of starting an LLC. The good news is forming an LLC is a relatively straightforward process and has several benefits, including the freedom to shape your business exactly how you want it. You can even form an LLC before you’re ready to launch your business officially. If you’re considering starting a small business, here are 5 primary benefits of doing it as a limited liability company.

3. LLCs are easy to form and maintain.

Is an LLC Right for Your Business? This Expert Breaks Down What to Know

By StoryStudio on April 22, 2024 11:19AM

1. LLCs offer legal liability protection.

“One of the most important reasons people think of when they're starting an LLC is they're looking for liability protection,” says Brittany Benson, an attorney licensed in Missouri and Lead Tax Analyst with Block Advisors who handles tax issues for small business owners.

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LLCs are an attractive option for small business entrepreneurs seeking to start their own businesses while enjoying limited liability protection, operational flexibility and the freedom to choose their tax classification. However, you may want to consult a legal or tax professional to understand the specific implications for your unique situation and business goals. Block Advisors are year-round tax professionals who help small businesses like yours stay successful. From payroll to bookkeeping to taxes to business formation, Block Advisors can help. Block Advisors is even offering attractive incentives to get your business started on the right foot. New customers can receive $25 off Business Formation, a free month of Bookkeeping with promo code: BKFREE, and a free month of Payroll with promo code PRFREE. Learn more at blockadvisors.com.

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Forming an LLC helps protect the owner’s personal assets if the business fails or is involved in a legal dispute. For example, if your business is sued and found liable, generally no one can go after your home, only property related to the business. This level of legal protection unique to establishing an entity like an LLC is not available to self-employed sole proprietors.

Despite having a few more compliances than a traditional sole proprietorship, forming an LLC is relatively straightforward. By filing articles of organization in your state, you can form your new entity in as little as a few days. Once formed, LLCs generally have fewer ongoing compliances than Corporations, which makes them easy to operate over time. For multi-member LLCs, the process gets more involved because the completion of an operating agreement is a good idea, and even required in some states. This document essentially designates the basic logistics of how the LLC will run. Still, states allow LLCs to be registered online or through a third-party service like Block Advisors.

2. LLCs provide the benefit of pass-through taxation.

Forming an LLC allows you unique tax freedoms that work in favor of the members of the LLC. If you’re a sole proprietor doing business under a DBA, the IRS simply taxes you as a self-employed individual. An LLC gets to choose how it’s taxed and a single member LLC is considered by the IRS as a “disregarded” entity by default, meaning your tax burden is treated as pass-through. “A limited liability company taxed as a disregarded entity, partnership, or S corporation allows the profits and losses of the business ‘pass through’ to the individual tax returns of the members,” Benson explains. “This can result in tax advantages, as the members report their share of the LLC's income and losses on their personal tax returns, avoiding the double taxation that can occur with C corporations.” Pro tip: Use Block Advisor’s Help Me Choose quiz to discover whether an LLC, S-Corp or C-Corp is right for your small business.

4. LLCs provide your business legitimacy.

Operating as an LLC can enhance the credibility and legitimacy of your business. Many customers, clients, and partners prefer to do business with LLCs because they perceive them as more established and legitimate than sole proprietorships or partnerships. Additionally, having "LLC" in your company name can convey a sense of professionalism and stability which may open credit opportunities with banking institutions or investors.

5. LLCs let you be your own boss.

Working for yourself is the goal of everyone with an entrepreneurial spirit. The satisfaction of naming your company whatever you’d like, calling your own shots, and being the decision maker for what’s best for you and your business affords self-fulfillment and a sense of pride hard to find anywhere else in the business world. LLCs offer you this and much more.

“Ultimately, LLCs are about freedom,” says Benson. “You get to decide how your LLC is managed and what goes in the operating agreement and other formation documents. It’s really just knowing that you have that flexibility to make your business exactly what you want it to be!”

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3. LLCs are easy to form and maintain.

1. LLCs offer legal liability protection.

By StoryStudio on April 22, 2024 11:19AM