Every year, thousands of up-and-coming intrapreneurs create startups in every field of the world. There are several options available to them, but the smart majority among them chooses to opt for an LLC or a limited liability company. This trend is completely understandable as there are many significant benefits of going the LLC route. A labor law attorney for companies or a business attorney can further explain the benefits in detail as well as the downsides.
Here are a few of the many advantages of starting your company as an LLC:
Limited personal liability
IF you start a business with a sole proprietorship, that business is you. The debt on that business is your debt. The business gets sued; you are getting sued. This business model is fine for local businesses, but anything bigger than that would put tremendous pressure on the owner. The LLC separates you from the business while also keeping you in power.
Now, if the business is in debt, your personal property is at no risk of being confiscated. Similarly, if an employee or partner of the company shows some negligence and gets sued, you are not responsible for them. (Learn more about this from labor law attorneys Nakase Wade)
Tax advantages
If you own the majority share in a corporation, you have to pay double the taxes—one for the corporation’s income and the other for when that income comes into your bank account. Alternatively, an LLC is classified in taxation as a sole proprietorship and doesn’t have to pay any taxes of its own. Instead, the taxes are passed through your income tax and the income tax of all of the other partners.
Flexible profit distribution
Corporations are required by the law to distribute their profits according to the numbers. A person with ten percent shares cannot get more than ten percent of profit. This fine for mega-corporations with hundreds of shareholders but can cause issues at a smaller level. Just because two partners have equal (fifty percent each) shares doesn’t mean that they have put in the same amount of money or effort into the business.
If two partners mutually decide that the person putting in more work or the one that provided the company with more investment in its early days would get more of the profits, they can do that in an LLC without any complications or issues.