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LLC Positives and Negatives

Updated on April 27, 2011

As a business owner, you will encounter many important decisions, such as which business structure to use in your business formation. The limited liability company is my preferred choice due to its many benefits.

What is a LLC?

A LLC is a type of business ownership incorporating several features of corporation and partnership structures, yet is distinct from a corporation or a partnership. Owners are called members, not shareholders or partners

Positives of LLCs

Flow Through Taxation: All your business expenses, profits, and losses flow through the LLC to the individual owners. You avoid corporate double-taxation. Usually, this will be a tax positive.

Limited Liability: Owners of a limited liability company have the same liability protection of a corporation. A limited liability company exists as a discrete entity just like a corporation. Members cannot be held personally liable for debts of the business

No Minutes: Corporations have to keep formal minutes, have meetings, and write down resolutions. The limited liability company business structure mandates no corporate minutes and is simpler to operate.

Problems of LLCs

Added Complexity: Operating a partnership or sole proprietorship will have less paperwork and complexity. A limited liability company may federally for its tax be classified as a partnership, sole proprietorship, or corporation.

Going Public: LLC members with aspirations to take their business public or issue employee stock in the future may want to choose the corporation instead.

Limited Life: Corporations can live forever, whereas a limited liability company is terminated when members die or the company undergoes insolvency.

In my opinion, the benefits of LLCs outweigh the negatives and that the limited liability company is the best for any business owner.

Visit the-llc-company.com for even more information about LLCs.

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