Selecting the right type of business entity for your project will be one of the most important decisions that you will make for your business. In fact, the type of incorporation you choose can make all the difference in whether you are a successful business or one that is drowning beneath avoidable tax obligations and legal fees. While there certainly isn’t a hard and fast rule that a business must be an LLC, there are many good reasons for the limited liability corporation over other models. Now, if you are a freelance writer who has no office, very few bills, and has a clear exit strategy, ignore everything we’re about to say and go ahead and choose the sole proprietorship if you like. For everyone else, let us make our case for the LLC.
The LLC provides the most legal protections for you and any partners you may have.
An LLC creates a business entity that is wholly separate from your organization. This enables people to protect their personal assets from any business debt that may incur. Conversely, it also protects each partner in the LLC from any personal debts that others may have. This is good news for anyone because, while we all want our business to succeed, we have to prepare for the worst. The LLC creates a legal wall between personal and private debt and legal responsibility.
Do the homework
As a business owner it is up to you to provide your future business with all possible due diligence as you review your plan and make these types of important decisions. While taxes are certainly a consideration, the importance of maintaining a legal separation between you and your business far outweigh many of the other considerations that small business owners may have. The LLC will provide you with a good corporate structure, easier tax preparation in most cases as they mimic partnerships, and have a fairly decent exist strategy compared to the C Corp.