LLC Formation: Benefits and Considerations
Should I form a Limited Liability Company?
If you own a business and/or investment property, you may be wondering if you should form a Limited Liability Company (LLC). An LLC can limit your personal liability in relation to business debt and lawsuits while offering flexibility of ownership, management, and taxation. Because an LLC is a company, not a corporation, the formation and management is less onerous and complex than a corporation.
Are you a co-owner of the business or real estate holdings?
An LLC can have one or more owners. The owner can even be your revocable trust!
What are the benefits?
A key benefit of an LLC is that all owners protect their personal assets from the LLC’s creditors. As a general rule, if the LLC can’t pay its debts, the LLC’s creditors can only go after the LLC’s bank accounts and other assets. That means, in most situations, your home, car, and personal bank accounts remain safe from the LLC’s creditors or a lawsuit against the LLC.
An LLC can be utilized to own and run nearly any type of business or to own rental and commercial real estate property. Additionally, having an LLC can protect your privacy by maintaining a level of anonymity and creating a separation between your professional life and your personal life.
Keep it simple.
When simplicity is a factor, an LLC may be the way to go. Unlike a corporation, an LLC does not require board members, shareholders, officers or directors. The administration of an LLC is not burdensome and may be easier for busy business owners, landlords or sole proprietors.
Ask the experts.
As with many business and financial decisions, it is best to seek the advice of a competent attorney and tax professional before deciding if an LLC is right for you.