If you are an entrepreneur who is planning to launch a startup business, you will probably choose the limited liability company (LLC) as your business entity. Aside from it, it gives you liability protection when unwanted circumstances, such as a lawsuit filed against your business, it has also pass-through taxation that allows you to pay business profits on your personal tax return forms.
Now, you might be thinking if your business qualifies for LLC. Tracing the roots of the LLC’s attributes from its advantages, structure, and risks, business experts say that an LLC is a synthesis of three types of businesses. They are typically the ones that qualify for an LLC. Dive in to know them all:
Partnered-type businesses are qualified for being an LLC. These types include General and Limited Partnerships. General Partnerships promote the equal distribution of business profits and operations management to the owners. Limited partnerships, on the other hand, uphold different roles of the members from which one partner operates the business while the other serves as a silent investor. Most partnerships used to dissolve their initial structure and carry all the assets and liabilities into the newly-established LLC.
- Sole Proprietorship
The second type would be an individually-owned business entity wherein just one owner is responsible to run his or her business. The sole proprietorship has a single embodiment for the personal and business responsibilities, keeping a more vulnerable relationship to liabilities. Little do we know that this business type commonly shifts to an LLC by just applying for Articles Of Organization in the state, along with the necessary documents and state filing fee. The state of Wisconsin, for instance, has a 130-dollar WI LLC cost for filing Articles of Organization.
This is the last type of business that qualifies as LLC. Corporations are treated as the entity separated from their owners, which is what we call shareholders. Its business structure has a board that oversees the company’s mission, goals, and strategic direction. Buy and sell property, buy and sell a stock, and party to a lawsuit enumerating the capabilities of a corporation as it stands as its own entity. The LLC adopts the liability protection this type of business has.
Choosing LLC could be a huge responsibility as a legally-recognized business. These are the factors to consider when shifting to an LLC:
As a legally-acclaimed business entity, LLC requirements vary from one state to another. It includes the documents and forms to be filed or even the limit of the number of members.
- Long-term Goals
Despite the advantages of an LLC as a business structure, the owner must first determine what are the business’ goals in the future. For instance, if an owner wants to sell stock to the masses soon, it is better to form a corporation instead to attain preferred shares.
Having an LLC would provide you a more flexible management structure for having that board that oversees the business’ daily operations. However, it may also add confusion for you from the LLC’s more complex structure due to its broad system.
Choosing LLC is indeed a great idea to consider as a business entity and structure. But you need to research this entity thoroughly before deciding to move your business venture to an LLC to avoid any headaches along the way.