Forming a business can be difficult; determining the best type of business entity to form can be challenging. With several options to choose from, including sole proprietorships, partnerships, corporations, and so forth, the benefits and disadvantages of each entity can be difficult to weigh, especially when you are just starting out. However, there is one common option that many entrepreneurs across the state opt for, which is a Limited Liability Company.
A Limited Liability Company (LLC) is a business entity that combines elements of a partnership, sole proprietorship and a corporation. In this type of entity, the owners (members) are not personally liable for the business’s losses or lawsuits. An LLC can operate with one or more owners.
There are many benefits to forming an LLC, which include:
- Limited liability;
- Simple filing process;
- Tax advantages;
- Management flexibility, among others.
The most important benefit of a Limited Liability Company is the aspect of limited liability, which refers to the owners not being held personally liable for business losses. This concept is unique to LLCs and corporations, alike. It is very enticing to many entrepreneurs, as they do not have to risk their personal assets in exchange for running their business. Also, the process of applying to form an LLC is relatively easy and requires a limited amount of paperwork, which is also enticing to busy entrepreneurs.
LLCs are often classified as sole proprietorships or partnerships for taxation purposes. Here, the entrepreneurs are able to take advantage of the “pass-through” tax system, in which business taxes are not imposed and all income and expenses are passed through to the owners’ personal tax returns. Corporations, on the other hand, are taxed at the corporate level, as well as at the state and personal level through income or dividends.
LLCs also offer a substantial amount of management flexibility. In a typical corporation, there is a need to have annual shareholder meetings in order to elect a board of directors to oversee the daily operations of the business. In an LLC, this need is eliminated, as there is a less formal management structure and more freedom for the owners to manage as they please.
The decision to start your own business is exciting. After carefully exploring your options, you may determine that forming a Limited Liability Company may be able to suit your business needs. Prior to beginning the formation of an LLC, it is important to contact a skilled New York business law attorney who can guide you on your path to success.
The experienced business law, commercial and business transactions attorneys at Martin Grossbach, P.C. can assist you with the formation of your dream business and help you achieve success. The attorneys have extensive experience in representing business owners and professional practitioners in commercial law and business transactions, as well as business formations. Call the attorneys at Martin Grossbach, P.C. at (914) 631-6666 to schedule a consultation.
