Pros and Cons of an LLC
Has the thought of starting an Limited Liability Company (LLC) lingered around for a while now? An LLC is a business organization that can be a combination between a partnership or a sole proprietorship and corporation. LLCs are known to allow a more flexible management agreement. They also give a lot of freedom in the distribution of income. This means that members are allowed to distribute the income in any way they wish, as agreed by all without the need for additional deposits. Below is a list of pros and cons to organizing an LLC.
Pros
- LLCs are allowed to have an unlimited number of members.
- The members are personally protected from any liability. This means that if the LLC gets into a lawsuit, the member’s personal property is protected unlike a Sole Proprietorship.
- The member’s share of the bottom line is not subject to self-employment taxes.
- Less documents filed annually compared to a Corporation.
- Credibility of the company – With the word LLC in your business name you will experience a positive perception of long-term financial stability.
Cons
- Not all organizations can turn into an LLC. For example, insurance agencies. banks, or professional serviced businesses are not permitted to structure an LLC.
- Much like a corporation, LLCs are required to pay the minimum $800 tax fee per year.
- May not draw investors – You can’t take your LLC to the general public. Regardless of the fact that your business begins to profit, the entity has no stocks for the public to purchase.
There are many reasons to start an LLC or “not” start one. We would strongly recommend that you seek advice from a CPA or attorney to which entity formation would be the best fit for your business needs.
For more information on starting an LLC, please call us at (916) 480-1225 or click here to have one of our agents contact you.
