Top Benefits of Having a Limited Liability Company
It is notable that several businesses prefer the arrangement of a limited liability company as compared to other forms of arrangements. Perhaps it is because of the multiple advantages that come with establishing a limited liability company. In a limited liability establishment, the company takes advantage of liability protection, tax advantage, flexibility and simplicity like that of a partnership.
There are few requirements for establishing a limited liability company and maintaining its operation is not challenging. Nowadays, you can access information about forming a limited liability company on the internet. While you will incur a few expenses to register a limited liability company, it has long term benefits which outweigh the costs involved. This article elaborates the top benefits of registering a business as a limited liability company.
Limit personal responsibility Sole proprietors and partners in a partnership business do not enjoy the limited liability since they are not differentiated from their business. Therefore, legally, you and your business are the same, and your business debts are also your debts. This is not recommendable because your assets are at risk if the business cannot meet its obligations. That is not the case for a limited liability company because the companys assets are treated separately from personal assets. Your assets are safe since the business is a separate entity from you.
High credibility Nowadays, anyone can claim to a business proprietor. However, you will stand out among the rest if your business is registered as a limited liability company. It gives you an additional advantage over your competitors who have other forms of business arrangements.
Tax advantages Tax laws of various states are different, and some are ambiguous to understand and determine the tax amount. Different taxation rates are used for limited liability companies, and they are a bit lenient compared to individual taxation rates. Having a limited liability company helps you to take advantages of favorable rates of tax.
Limited paperwork To some extent, corporations also enjoy limited liability, but there are some requirements that they must fulfill. Such requirements involve lots of paperwork such as paying annual fees to the state, publishing annual reports, holding shareholder meetings and record keeping. A limited liability company has no such requirements, and that saves you from the paperwork which is tedious.
Flexibility There is greater flexibility when it comes to the profit sharing of a limited liability company as compared to a corporation. The distribution of profits in a limited liability company is determined by the partners, and thus, it is flexible and convenient. Corporations have strict profit sharing policies, and it must be done according to the number of shares that shareholders have.