What Are the Advantages and Disadvantages of an LLC?

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What Are the Advantages and Disadvantages of an LLC?

If you’ve ever had a great business idea or have thought about starting your own business, it’s likely you’ve heard about limited liability companies before. From a business law standpoint, a limited liability company allows you to start your business without a lot of personal liability. It’s always best to hire a top-notch business lawyer to discuss how to start your business off the right way, otherwise, you could end up making a big mistake that costs you later on. LLCs offer a great opportunity to get your business up and running legally, but you should understand all of the advantages and disadvantages before you actually do anything. Keep reading on to learn about the advantages and disadvantages of an LLC.

The Advantages of an LLC

A limited liability company can be a great option for businesses because they limit your liabilities to only your investment in the business. That means in the event of a lawsuit, your own personal assets are essentially protected. The worst case scenario is that you would only lose the money you invested in the company. That doesn’t mean that you can participate in criminal business activities and get away scot-free, but an LLC does offer a nice level of protection.

Another benefit of an LLC is that they offer pass-through taxation, which means the business income can be treated as personal income and not be subject to heavy federal taxes. LLCs are also able to operate without a board of directors, which allows decisions to get made quickly and in a stress-free way. You can also have as many owners as you want with an LLC so that you can grow at the rate you wish. These advantages are certainly attractive for future business owners to think through.

The Disadvantages of an LLC

An LLC certainly offers its fair set of advantages. However, it’s not perfect. Some of the major disadvantages of an LLC are that it can be tough to raise capital. You won’t be able to issue stock to raise funds for your company. That means if you are a company that is growing rapidly, you might run into issues in trying to add new investors to your company. You also will deal with paying higher fees rather than creating a sole proprietorship and general partnerships. Things can get confusing across state lines, as different states operate under their own LLC laws. There is also a limited lifespan for limited liability companies, which is certainly important to keep in mind when thinking about the future of your business.

If you are looking to form a limited liability company or have any questions about whether or not it is the right option for you, reach out to Derryberry & Associates LLP today. We are experts in business law and can provide you with the legal advice you need to make the right choice. Forming a limited liability company is easy if you have the right business lawyer by your side!