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The advantages of a limited liability company

Choosing the appropriate legal structure for a new business venture is a decision that entrepreneurs in Colorado and around the country often find difficult. Corporations shield the personal assets of shareholders from business-related litigation, but they also require entrepreneurs to maintain detailed records and may lead to higher tax bills. Limited liability companies protect assets in the same way as C or S corporations, but they are less complicated to set up and do not require annual shareholder meetings or a board of directors.

The profits of a C corporation are taxed at corporate tax rates, and shareholders then are taxed ondividends received. This double taxation can be avoided by setting up an S corporation, but an LLC also offers this advantage. Adding the letters LLC after a business name may also add a degree of credibility and assure uncertain customers.

However, an LLC may not be a wise choice in certain situations. The roles in a corporation are generally clear, but conflicts can arise when an LLC has multiple members and no coherent operating agreement in place. Social Security and Medicare taxes can also be higher for members of an LLC then officers in an S corporation. Another problem with LLCs is that, unlike corporations, they cannot sell stock, and this can make it more difficult for them to raise funds.

Getting a new commercial enterprise off the ground can be an exciting time for entrepreneurs, and attorneys with business law experience may be able to help them deal with the myriad legal and administrative challenges involved. Attorneys could help entrepreneurs to choose the business structure that provides them with the best combination of flexibility, asset protection and tax benefits, and they could also help with regulatory issues such as permit and license applications.

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