What are the benefits and downsides of an LLC?

On Behalf of | Aug 23, 2021 | Business Formation, Business Law | 0 comments

When you are getting started with your business, one of the first things you need to do is decide what structure you would like your business to have. Every structure comes with its own set of potential benefits, as well as drawbacks you want to consider.

LLCs are a popular option for many reasons, and it would likely do you good to take a look at them first. They offer many reasonable and enjoyable perks, but may not suit everyone’s plans.

The benefits of an LLC

Fit Small Business examines both sides of an LLC, including all of its benefits and any potential drawbacks it may have. First, in terms of potential benefits, flexibility serves as one of the biggest selling points. You have a lot of management options and can have an unlimited number of members or owners. You can also potentially opt for pass-through taxation, which simplifies and potentially even lowers your taxes.

The paperwork filing process is easier and simpler, too, being straightforward and unilateral. You can enjoy easy cash distribution options and the credibility of having a formal business structure to your name, too. Finally, the biggest draw: limited personal liability. This means if something happens and you must file for bankruptcy with your business, it will not affect your personal assets.

Potential drawbacks

On the downside, LLCs can have hefty annual fees and costs for maintenance. If you have an interest in attracting investors, LLCs do not get many bites, too. Membership turnover often comes with a lot of paperwork, making the process clunky and difficult, and pass-through taxation does not necessarily guarantee cut taxes. But these often serve as the biggest downsides, so if they seem manageable to you, an LLC might serve your interests well.