Before forming an LLC, it is important that business owners truly understand what they are getting themselves into. Not knowing where to start and how to do this right can lead to problems and confusion in the future. First, you need to know what LLC is all about and why it is the best option for your business.
Various Methods to Start a Business
If you are still in doubt of which method to use to start your business, know that you have a couple of options to pick from. It is important that you know each one of your choices to ensure that you are picking the right one for your business, no matter what the size of your company is.
- Limited Liability Company. This is one of the top choices when picking a way to start a business with limited personal liability with the owners but still, get taxed as a partnership would be.
- Sole Partnership. This is where a single person owns the business.
- General Partnership. This is when two or more people have a simple agreement to own a business.
- Limited Partnership. This has two types of owners – general partners and limited partners.
- Works similarly to LLC. This is owned by the investor or the shareholder.
Do You Need an LLC?
So, do you need an LLC before you can start a business? The answer is no. It is not absolutely necessary to form an LLC first so that you can start your business. In fact, LLC is just one of the many methods to organize your business. As mentioned above, you can also choose the sole proprietorship, general partnership, limited partnership, or corporation.
Reasons Why You Need an LLC
There are plenty of factors to consider when you are getting ready to choose the form of your business. And even though there are various options for your business, the LLC is still the most preferred these days, especially for small companies. That is because of the following benefits:
- Limited Personal Liability (Business Debts). In case the company is facing debts or lawsuits, LLC members will not be personally liable to take care of it. This means that the personal assets of the LLC members will not be used to pay for the company’s debts.
- Raise Capital from Various Investors. With LLC, you can raise capital from different investors. This can be done by bringing in more members who can help contribute to the funds or services that will greatly benefit the business.
- Tax Advantage. Compared to corporations, with LLC, there is no separate tax charged for it. The profits and losses of LLC are passed and divided to the members like what would happen in partnerships.
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