One of the first decisions you have to make about your new business is to choose your legal structure. Sure, this may not be the most exciting decision ever, but it’s critically important.
One common legal structure for small businesses is known as a limited liability company, or an LLC. In this blog entry, we’re going to break down the basics of an LLC and highlight some of the benefits. Contact us today if you’d like to discuss whether an LLC is the best option for your business.
An LLC is designed to limit the liability of a business while providing the tax efficiencies of a partnership or a sole proprietorship. If your business is a sole proprietorship, you could be personally responsible for the debts of your company. A lawsuit against your company could mean the loss of your personal assets. By incorporating as an LLC, even if your business goes bankrupt, courts and creditors normally won’t be able to seek your personal assets, as long as you honored the corporate structure and followed certain safeguards. Needless to say, failing to isolate your personal assets from your business can turn into a nightmare scenario.
An LLC offers critical tax advantages as well. Income from an LLC generally “flows through” to the owner for tax purposes. In other words, the LLC doesn’t pay taxes; the owners pay taxes on their personal tax returns. This helps the owner or owners to avoid the “double taxation” trap in which they would have to pay taxes on their earnings twice – first as the business, and then personally.
If you are already running your business as a corporation, the good news is that we file a certificate of conversion to an LLC with the State of Florida, if appropriate. There’s more to consider, but it’s important to note that other legal structures may provide similar benefits for business owners, and depending on the particulars of your business.
The decisions you make today, in particular during the process of structuring your business, will have repercussions throughout the life of your company. Please give this process the thought and attention it demands. If you’d like to discuss this subject further, please contact us today!