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What Are the Advantages of Creating an LLC?

Posted on in Business Formation

IL business lawyerBusiness owners have a number of options for structuring and managing a business. Determining the ideal structure can sometimes be difficult, and different types of business entities can provide certain advantages and drawbacks. In many cases, structuring a business as a limited liability company (LLC) is the best option. If you are starting a new business, bringing new partners into an existing business, or looking to change the way your business is structured, you will want to consider whether an LLC is the right choice for you.

Benefits Provided by LLCs

When a business is a sole proprietorship or general partnership, this may provide owners or partners with flexibility, but they may be personally liable for business debts. On the other end of the spectrum, a corporation may provide protections from liability, but owners or shareholders will need to meet a variety of complex requirements when operating this type of business. A limited liability company can offer a middle ground between these options, and it may provide a number of advantages, including:

  • Protection from liability - As the name implies, an LLC places limits on the liability that applies to a business owner. An owner of an LLC usually cannot be held liable for business debts. Similarly, business partners and the business itself will be shielded from liability that affects one partner, such as the requirement to pay a judgment in a personal injury lawsuit. However, it is important to ensure that there is separation between the personal finances of an owner and the finances of the business. If an owner’s personal finances are intermingled with their company, a judgment against the company may “pierce the corporate veil,” and an owner may be personally liable in these cases.
  • Tax benefits - An LLC may use “pass-through” taxation in which the business’s profits or losses will apply to the members’ personal income taxes. A pass-through deduction is available in these cases, which can provide significant tax savings.
  • Flexibility - Members of an LLC are free to establish whatever management structure they choose. This will allow for simple decision-making and easy adjustments to business procedures whenever necessary. Members also have flexibility when determining how profits earned by the business will be distributed, and this may be done based on each partner’s level of investment or involvement in the business or other factors.

Contact Our DuPage County Business Formation Lawyers

If you are a business owner, it is important to make sure your company is structured in a way that will provide you with financial advantages and protection from liability. Stock, Carlson & Asso. LLC can advise you of your options during the business formation process, including helping you determine whether an LLC is the best option for your company. We will make sure you take the correct steps to establish a business structure and formally register your business, and we will also help you meet any other legal requirements that may apply to your company. We can assist with other business-related issues as well, such as creating or updating contracts or resolving disputes through civil litigation. Contact our Wheaton business law attorneys today at 630-665-2500 to learn how we can provide the legal help you need.

Sources:

https://www.nerdwallet.com/article/small-business/starting-successful-llc

https://smallbusiness.chron.com/benefits-having-llc-15773.html

https://www.sba.gov/business-guide/launch-your-business/choose-business-structure

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