California entrepreneurs and business hopefuls have a lot to do when starting out. One of the first things is deciding what formation you want for your business. Each type of business formation has its own benefits and drawbacks.
Today we will look at limited liability corporations, also known as LLCs. This common business structure may provide you with everything you are looking for.
Entrepreneur looks at the advantages of forming an LLC. The first benefit you will hear is the limited personal liability. As the name implies, LLCs provide business owners with lowered personal liability. Sole proprietorships consider a business owner and their business the same “person”. This means you hold responsibility for all financial debts of your business. With an LLC, you and your business are separate entities. You will not risk personal assets for business disputes, debt and so on.
An LLC does not have the same strict requirements as other business models. For example, corporations have ownership restrictions and duties owed to shareholders. There is a lot of paperwork involved. Some corporations must hold yearly meetings to conduct company business. They must elect directors and more. LLCs sport a less rigid system. There is more flexibility in both ownership and management. For example, LLCs have pass-through taxation. Unlike S corporations, there is no restriction on their type of owner or numbers.
LLC owners also have more flexibility in choosing how they want to run the business. Formal structures do not bind them. If you value flexibility and protection of personal assets, you may benefit the most from an LLC.