People who are starting a business have to make a variety of decisions, many of which can make or break the company. One of these is the business structure that the company will operate under. Some new business owners use the sole proprietorship structure, but there’s an option that might be better suited for the new business—the limited liability company, or LLC.
Starting an LLC means creating a legal business structure that’s separate from you as an individual. You’ll need to choose a name for your business, file the Articles of Organization and pay a filing fee.
What happens after you create the LLC?
Once formed, your LLC can get an Employer Identification Number (EIN) from the IRS, which is like a Social Security number for your business. You’ll also be able to open a business bank account and sign contracts under your business’s name instead of your personal name.
You’ll also be able to count on the benefits of an LLC. One of the most important is the personal liability protection. The LLC establishes a dividing line between your personal assets and the company. This means that if the business is sued or has debts, they can’t come after your personal assets.
Another important benefit is the flexibility in taxation. LLCs typically use pass-through taxation, which enables you to file the company’s taxes on your personal income tax return. The other option is to have the LLC taxes like a corporation.
It’s critical that anyone considering starting a business learns about the various structures they can use. This, and other decisions about the company, must be made in a way that protects the company and your own assets. It may be best to work with someone familiar with these matters.