There’s a lot one must consider when starting their own business from scratch. Everything from the name of the business, to the marketing and branding, to what the business will offer, to who will work there, to what the business hours will be must all be considered.
All the latter aspects are surely important for any business. However, the legal aspects of a business are just as important, if not more. Contracts must be signed; the business must be properly registered with all applicable certifications up to date; and federal, state, and local regulations must be followed by the owner and all employees.
Another legal aspect of a company that one should consider is setting up a business’s legal structure as a Limited Liability Company (LLC). Read on to see why choosing to set up your business as an LLC could be a good idea.
You Won’t Have to Worry About Double Taxation.
Did you know that owners of corporations may be subject to double taxation but that owners of LLCs are not? It’s true!
Corporations normally pay taxes on net income, and then the owner must pay taxes again on the dividend income they receive. On the other hand, when one has an LLC, they can skip having the file a corporate tax return and can instead just fill out an individual tax return, meaning there’s no double taxation for them.
An LLC is Essentially a Blend of a Corporation and a Partnership.
Both LLCs and partnerships aren’t subject to double taxation, making them similar in a sense. LLCs, however, are also similar to corporations in terms of holding limited liability. But unlike partnerships, LLC-structured businesses don’t need an owner who’s considered a “general partner” who would be held liable for any debts of the business. And unlike a corporation, as mentioned, there’s no double taxation. So, in a way, an LLC offers a blend of both a corporation and a partnership without being exactly like either.
Ownership Structures are More Flexible.
Many business structures disallow how many owners a company can have or even the types of entities who can take ownership of the company. What makes LLCs different is that their ownership structure is highly more flexible. These businesses can have any number of members, members can be individuals or of any entity, and the members can own up to any percentage of the business that is agreed upon, as long as it doesn’t surpass 100% of the company.
All in all, an LLC is a great legal structure to have for a business. Although it isn’t free to achieve the legal structure, it’s worth it in the end for many businesses.
Are you interested in setting up an LLC in Southern California? Contact Business Law Attorney Torrence L. Howell now for assistance. His phone number is (909) 920-0908.