It is crucial to understand that the legal structure impacts how the business owners pay taxes, how they make decisions, and how they receive the income. As an entrepreneur, you need to understand that a Limited Liability Company helps share specific characteristics with corporations and partners.
Less Paperwork
Most people are shifting to LLC since there is less paperwork involved. In a situation where you are dealing with corporations, you will find out that they have to observe specific requirements that cannot suit an informal or small business. On the other hand, they must hold annual shareholder meetings, pay annual fees, and make annual reports.
It has been discovered that most Corporations you will come across have substantial recordkeeping needs. However, this is different when dealing with an LLC. They do not have to hold annual meetings, and they are not needed to keep extensive records. In other words, there’s less paperwork involved with LLC.
Limited Liability
One of an LLC’s standard benefits is that the business owners have limited liability for all the business decisions. If the business owes debts or is sued, you do not need to pay for the debts as a business owner. It is critical to understand that partnerships and sole proprietors are reliable for business debts. In other words, it is essential to note that the members of LLCs are protected from all forms of business debts.
Management Flexibility
It is vital to note that Corporations contain a fixed management structure comprising a board of directors that checks and oversees the business policies and staff who conduct day-to-day businesses. However, it is essential to note that LLCs do not need to use this structure since the LLC members have options concerning running the business and making vital decisions.
Income Distribution
Based on the U.S. Small Business Administration, the income that is earned by LLC flows to the taxes and members on the income that is paid through the taxes of the owners. However, it is advisable to understand that the LLC is not taxed as a business. Due to this reason, this offers the business flexibility to distribute its income according to their likes. When using LLC, you will get various benefits, which will enable you to meet your business goals.