Why Should You Form a Limited Liability Company?

Looking to start a business? If so, you should learn about the various structures that you can go for. If you are starting a one-person operation, you may be considering forming a sole proprietorship. However, this entity can be quite risky since your personal assets would be tied to the business. This means that your debtors can seize your assets in case of judgments or debts.

To protect your personal assets from the actions of your business, consider forming a limited liability company. Also simply known as an LLC, this business entity provides various tax advantages while shielding your personal assets like an incorporation would do. Attain a better understanding about LLC vs corporation chart.

What is a Limited Liability Company (LLC)?An LLC is a legal entity that is formed by one or more people for the purposes of conducting legal business in the country. The LLC is a separate entity from its owners. This means it can do various activities such as invest, borrow funds, own property, lend funds and so own in its name. On the same note, the LLC can be sued by debtors. However, should the LLC be sued, the property of the manager or owner would be shielded from the debtors. Since the LLC is an entity on its own, only its properties or assets can be used to offset any debts that may be owed to third parties. View more information about the c corporation.

Most people form LLCs for the main purposes of protecting their personal property. However, this is not the only reason that makes LLCs more attractive than sole proprietorships. Other advantages of this business structure include:

i) Flexible ManagementAnother benefit of operating an LLC is that the entity is flexible. There are various management structures that LLC owners can opt for. According to the law, the LLC control is under the owners. However, the LLC can elect to be run by other parties (for example, managers) through its operating agreement. The management members can either be owners or non-owners of the business, depending on what the operating agreement indicates.

ii) Perpetual ExistenceAn LLC has perpetual existence unless it is specified otherwise in the articles of organization. Perpetual existence allows changing of owners without the company having to be solved. For example, when a member withdraws or retires from the company, the entity will not have to cease operations.

This flexibility makes an LLC the ideal option for one or a few owners or a company with many owners that may be in different states.


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