One of the most common business structures is the limited liability company (LLC). It has a lot of advantages over other types of structures. However, the raging question on the minds of many business owners is, “does my business actually need an LLC formation?”
When we reached out to Success Financial with this very question, the answer was short, concise, and straightforward. Succinctly put in their own words, they said, “Although forming an LLC is not essential for small businesses, the benefits of doing so usually outweigh the modest cost and effort.” Thus, an LLC should be considered by any business owner who wants to restrict their personal liability for business debts and lawsuits.
Before going into the details of the answers provided by Success Financial, it is imperative to know who they are, what they do, and if, indeed, their words should be relied on or taken with skepticism.
Success Financial has been helping people scale up their businesses for years now, and their team of experts has gained a mastery of the market through and through. Thus, they are your go-to person for any business-related question.
THE PROS OF AN LLC FORMATION
The major and the most essential advantage of an LLC is that it protects its owners from personal liability. This means that if the LLC defaults on a debt or is sued, the owner’s personal financial assets are safe.
This protection is not provided by sole proprietorships or general partnerships. Also, LLCs don’t pay corporate income tax, meaning that the owners can avoid double taxation, unlike in corporations.
The fact that they are very easy and inexpensive to form are features that make their benefits outweigh the cons. At Success Financial, business owners, especially startups, are often adviced to form an LLC.
WHEN IS THE BEST TIME TO FORM AN LLC
Generally, no time is too early or too late to transform your business into an LLC. However, it is primarily preferable if you start off as an LLC. This way, you get to fully harness the benefits that come with being a limited liability company.
Nonetheless, if you started out as a sole proprietor or partnership, it is best to convert to an LLC when you’re serious about growing your business and making more profit.
Since Sole proprietorships are only suitable for enterprises with low-profit margins and low-risk involvement, you should try to scale up your business as soon as there is an increase in the potential for risk or loss.
HOW TO FORM AN LLC
The safest thing to do is consult firms with expertise in this field. You can reach out to Success Financial through their website to help register your business as an LLC. Recently, the agency just launched an exclusive marketing program for select clients.
Conversely, if you are ready to start an LLC on your own, below are the steps you can follow.
- Select the state where you live and intends to have your business
- Choose a unique and distinguishable name for your business
- Choose an LLC registered agent
- File Your LLC’s Certificate of Formation
- Create an LLC Operating Agreement
- Get an Employer Identification Number (EIN)