27 Sep

Limited Liability: More Perks, Less Responsibilities

business partnershipA limited liability company (LLC) is a business organization that combines the perks of a corporation with that of a partnership or sole proprietorship. It’s a business type where the liability of the company’s members is limited.

Less Meetings, Less Shareholders

An LLC helps small businesses gain the benefits enjoyed by corporations, while allowing them to remain small. This is because these small entrepreneurs don’t have shareholders that must meet to make decisions, unlike traditional corporations. Small businesses also don’t require the stiff bylaws that come with operating huge corporations.

The limited liability company model is, indeed, a good alternative as the tax benefits are better.

Less Hassle, Less Fear

The limitation of liability is probably the primary reason most small businesses choose to become an LLC. An LLC shareholder is not personally liable for any debts that can be made by the company. Declaring bankruptcy, for instance, is always an enormous headache for a corporation, incurring serious consequences for credit rating. A limited liability company owner need not worry about personal finances becoming caught up in the matter. Instead, what they have to shell out is limited to a fixed amount – usually just that which they invested.

Also, in the event of a lawsuit, the plaintiffs are suing the company and not the owners and investors. By contrast, corporations, sole proprietors and partners are directly liable for all the debts and lawsuits of their business.

Forming an LLC through My Corporation is the obvious choice for many entrepreneurs, but for others, it may not be worth it. While the paperwork and financial management involved in creating one are substantially easier to deal with than that of a corporation, the two responsibilities are still more complex than that of a simple sole proprietorship. Hence, the decision to become an LLC should be given careful thought, and must be handled by consulting both a lawyer and a business accountant.