Turn that New Business Into an LLC | Patience Law

With the downturn in employment, many people are going from holding jobs to creating their own. Whether you have just started your own venture or still planning to do so, you may want to hear about the benefits of becoming an LLC.

LLC, or Limited Liability Company, is a type of business organization which is becoming very popular because of the benefits that it provides the owners.

Although it may be easier to make your business an LLC, instead of a sole proprietorship, when you are establishing it, depending on how your business is set up it should be possible to convert it to an LLC.

If you have established your business as a sole proprietorship, it may have been done simply by filing a DBA (doing business as) form in your locality. It is possible that you may not have registered your business with the state. An LLC is one of the forms you may choose upon registering your business.

There are pros and cons to starting your business as an LLC, but the biggest benefit would be that it provides liability protection to the owners of the company. The business can establish its own debt, for which owners are not liable should the business fail. The owners cannot also be held legally responsible should the business be taken to court for whatever reason.

A key benefit is pass-through taxation for the owners which means that they are still able to file income or loss on their individual income tax returns. Other benefits would be increased credibility with shareholders, less stringent requirements compared to corporations, and a more flexible management style. There are no business taxes, no board meetings and no board of directors, which corporations are required to have.

There are some disadvantages, mainly in the form of legalities and fees. To form an LLC, Articles of Organization have to be filed and filing fees paid in the state in which you register your business. Some states even call for annual report or franchise fees. These are free however for sole proprietorships and general partnerships and is reasonably-priced for small businesses. Ownership of an LLC is often harder to transfer because there is no stock to be sold and all owners must agree to any changes.

While you may set up an LLC with only one owner in some states, others will require at least two partners. Another disadvantage is a requirement for the payment of self-employment taxes, something you would have to do if an LLC becomes your only income anyway.

To save themselves the hassle, many people who wants to form an LLC resort to hiring lawyers for handling the legal requirements. Forms are also available on the Internet for those who feel competent at tackling those issues themselves. If such is the case, just be sure to use the forms which are recognized by your state and research any possible special requirements if any.

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