Is An LLC The Right Choice For My Small Business?
Once you start a small business, you’ll be faced with several choices to make. One of the most important decisions you’ll be tasked with is choosing the structure of your business.
You’ll have multiple options, including forming a sole proprietorship, partnership, S corporation or limited liability corporation. Limited liability corporations are often recommended for small business owners – according to the U.S. Small Business Administration, it’s one of the most popular ways to incorporate.
Of course, just because it’s popular doesn’t mean it’s the right decision for you. Here are some advantages and possible disadvantages of choosing an LLC.
Taxes
An LLC may pay lower taxes than a corporation, depending on the net income of the owner. Additionally, LLC owners aren’t subject to double taxation, which means the LLC may not have to file a return with the Internal Revenue Service. Business owners still may be subject to self-employment and other types of taxes, although this will differ state by state. (In Florida, you won’t be subject to state income tax.)
Liability and Cost
Liability is pretty straightforward – after all, it’s called a limited liability corporation for a reason. If an LLC faces debts or claims from debtors, the business owner(s) are protected. Your personal property like homes and vehicles will be off-limits to creditors. Additionally, owners of LLCs typically cannot be sued even if a business is facing legal action. Of course, there are tradeoffs. An LLC is more expensive to operate and often comes with annual fees.
Record Keeping
LLC owners must be diligent record keepers because the limited liability companies needs to be separate from the personal finances of the owner (or owners). Business funds cannot be used for personal expenses – if they are, you run the risk of losing limited liability status.
As you decide how to incorporate your business, F&S Projects can help. Our team of experts specialize in everything from business plans and market research to tax planning and valuation. Call us at 954- 482-9681 or contact our team here.
