Why You Should Consider Forming an LLC

You have come up with a great business idea and you know you have the drive to make it successful. Maybe you have even gotten started and are currently structured as a sole proprietorship. While sole proprietorships have many benefits, such as a simple business structure, they also have some inherent risks. However, a limited liability company (LLC) is a versatile and powerful choice for small to medium-sized business owners. LLCs bring many benefits, which our Utah business law attorney explains below.

Protecting Your Personal Assets 

In the future, your company may take on debt it is not able to repay, or it may be sued by a client, vendor, or other party. With a sole proprietorship, your own personal assets may be at risk in a situation like this. This is one of the biggest reasons many entrepreneurs opt for an LLC. After you form an LLC, the business becomes a separate legal entity from you. As long as the business is properly structured and maintained, creditors or claimants can only pursue the business’s assets and not your personal assets.

It is important to note that the limited liability provided is not absolute. If you personally commit fraud, guarantee business loans, and do not separate your business and personal finances properly, the protection provided may be compromised.

Tax Benefits

Another very attractive benefit of LLCs is the tax flexibility this structure offers. Traditional corporations typically face double taxation, meaning taxes are applied at the corporate level and again when profits are distributed to the shareholders. However, LLCs are pass-through entities meaning the business does not pay any federal income tax. Instead, owners report profits and losses on their own income tax, therefore avoiding double taxation.

More Credibility 

Perception matters in the business world. When you operate as an LLC, it shows a higher level of legitimacy and professionalism than a sole proprietorship. Being an LLC signals to suppliers, clients, and investors that your business is a legitimate, legally established entity. This enhanced credibility can help attract clients, streamline banking and financing, and strengthen relationships with suppliers.

Flexible Operations 

When comparing LLCs to corporations, the former is much simpler to operate. Corporations require strict formalities such as extensive record-keeping and annual board meetings. LLCs do not have these legal and administrative requirements. Instead, the owners of the business can manage operations directly or the owner can appoint a manager to handle the daily operations of the company.

Our Business Law Attorney in Utah Can Help

There are many benefits you can realize by forming an LLC. However, the initial setup can be complex and requires more than establishing a sole proprietorship. It is critical that you set up your LLC properly to enjoy the many benefits they bring. At AGS Law, our Utah business law attorney can help you through the process and ensure the necessary steps are taken so you and your business are protected. Call us now at 801-477-6144 or contact us online to request a consultation and to get the legal help you need.

Source:

utah.gov/business/starting/structure.html