When you’re starting a business, choosing a legal setup is one of the most important decisions you can make. This article looks at why many entrepreneurs choose to start their business as an LLC company.

Liability Protection

LLCs provide legal protection for individual business owners (also known as members). For example, if an LLC company goes deep into debt and cannot cover its bills, the company’s legal status will block creditors from going after the members’ personal assets. According to Forbes.com, to take full advantage of this protection, members need to ensure the business keeps meticulous records and that their business and personal financial assets remain separate.

Tax Protection

An LLC company can also provide some protection from onerous tax burdens via pass-through federal taxation. Essentially, instead of the federal government taxing the business at the company level, the members themselves pay taxes on any profits the company makes. This can make filing taxes easier for the business. However, members should still be aware of taxpaying responsibilities they are accountable for.

Flexible Operations

Another advantage of this setup is flexibility: LLCs can operate under a range of management styles. For instance, members can run the business themselves or hire specialized managers to lean on their expertise.

Simple Setup and Maintenance

An LLC company is relatively easy to set up, but fees vary from state to state. To set up an LLC, you just need to choose a name and designate a registered agent—that is, a person chosen to receive correspondence on behalf of the LLC. Then, file articles of organization, obtain an employer identification number from the IRS and create an operating agreement. To help you get in the habit of keeping personal and business finances separate, your LLC should also open a business checking account as early as possible.

For more information on how the business world works, take a look at Pendleton Commercial Financing’s other blog posts.