People who are starting a business have to determine what business structure they’re going to use. One possibility is a limited liability company (LLC), which offers specific benefits, but those come with considerations that must also be thought about.
In this type of arrangement, the owner or owners are known as members. There isn’t a limit to how many members can be included in an LLC. All members should carefully consider the various points that apply to this business structure.
Division of assets
An LLC is a simple business structure that establishes a dividing line between the business and the members. This means that if the business is sued or has delinquent credit accounts, their personal assets can’t be seized to rectify the situation. Instead, only the company’s assets are on the line.
It’s critical for members to clearly separate personal and business transactions and accounts. There are limited cases when a judge may rule that the LLC doesn’t offer umbrella protection of personal assets.
Pass-through taxation
An LLC’s profits are passed to the members for tax purposes. Instead of the profits being taxed at the company level and then again at the member’s level, they’re only taxed once. There are alternate options for taxation if the pass-through taxation isn’t the best option for the business.
Starting a business is a big undertaking that must be handled carefully. Working with someone who’s familiar with starting a business is critical. The top goal must be protecting the company and the members so the business can thrive on success.