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Do you own a small business? Are you starting your own business? If you are just getting started with a LLC corporation it may be tempting to license your business as a sole proprietorship. It’s usually a quick process and costs less than becoming an LLC Corporation. However, if you start as a sole proprietorship you won’t be able to take advantage of the many benefits of owning a business. The smartest thing you can do for your business is become an LLC Corporation.
The main advantages of an LLC Corporation are:
- Limited personal liability
- No residency requirements
- Simplified record keeping
- Tax flexibility
An LLC Corporation provides the protection of a corporation with the tax flexibility of a partnership. When you incorporate your business it becomes its own entity. You have separated financial accounts from your personal ones. As long as your personal accounts and assets stay separate from the business you will be protect if your business is every involved in a lawsuit. It is important not to use money for personal expenses and the other way around when using LLC corporation.
Another advantage of an LLC Corporation is there are no residency requirements. This allows you as a business owner to incorporate your business in a different state to acquire even more benefits. For example, if you live in California you can incorporate in Nevada as a LLC corporation. There are many business benefits of not incorporating in California and you don’t have to live in, or hold meetings in Nevada to be incorporated there. Business owners also don’t have to be U.S. residents. Even people who are in the country temporarily are able to set up limited liability companies.
One of the big differences between a Corporation and a Limited Liability Company is record keeping. Corporations require board meetings and detailed minute taking. Limited Liability Companies don’t require any of that.
Depending on how you want to be taxed you can file additional paperwork to be filed as two different types of a Corporation; a C Corporation or an S Corporation. Owners claim their profits and losses on their individual tax returns. This avoids a double taxation because the IRS does not asses taxes on the company itself.
Carefully research the different types of business entities, each with their own sets of advantages and disadvantages. It’s important to choose the right one for your situation and business needs. |
