Over the past twenty years, the rapid growth of LLC filings is evidence of advantages that are popular with new and existing business owners. Below are the top advantages of an LLC business entity.
Many business owners choose an LLC over a corporation because it avoids the double taxation that exists for C-corporations. Instead, the operators of the LLC chose to be taxed as a sole proprietorship, an S-corporation, or a partnership.
An LLC can have one owner or many owners (sometimes called members). The Operating Agreement designates the duties of each owner or group of owners and names a Registered Agent as an official point of contact. Unlike an S-corp, which sets strict limits around owners and investors, in an LLC, businesses, as well as individuals, can be owners of an LLC. Owners do not have to be U.S. citizens, which opens the company to foreign investors and global capital.
In an LLC business entity, the owner’s personal assets are protected from business debts and lawsuits against the business. This is not absolute, yet in the past 40 years of court cases, the protections have remained strong.
Simple Set Up & Maintenance
Every business entity has a process to start and maintain the business. Sole proprietorships offer the least liability protections, yet they are the easiest to file and operate. LLCs tend to be the second easiest to file and operate. The filing process is typically straightforward, and the annual maintenance usually involves a filing form and a low annual operating/licensing fee.
For small business owners, the establishment of a formal Limited Liability Corporation (LCC) lends credibility over a sole proprietorship. It can make potential customers and investors feel the business is legitimate and unlikely to be a “fly-by-night” operation.