The advantages of forming an LLC

The advantages of forming an LLC

On Behalf of | Jan 4, 2021 | Business & Corporate Law |

If you’ve ever created or thought about creating a business in North Carolina, then you know that among the first things you need to do is choose a tax bracket for your company. One of the most popular, especially for small business owners, is the LLC, or limited liability company, bracket. But is its popularity really warranted? Keep reading to learn about the advantages you may see after choosing an LLC for your business.

Separation of assets

Starting your own business can be a daunting experience. Everything from spending money on equipment to signing a lease on a location comprise the risks that every entrepreneur takes at some point. However, the biggest risk one takes is placing him or herself in a situation in which someone could potentially sue him or her. The law states that if a company is categorized as an LLC, it is almost impossible to seize the owner’s assets. This is because an LLC separates your company and your assets, thus protecting items such as your home and vehicles in the event of a lawsuit.

Better tax situation

One of the biggest reasons why an LLC is the best option for small business owners is because of the tax advantages that it provides. An LLC provides you with what is called “pass-through” taxation. This means that any business’s income and expenses go through the owner’s personal tax return, allowing owners to only pay taxes on the profits.

Much less documentation

Although documentation is important for your business, the state does not require it. Unlike a corporation, a business that is structured as an LLC does not have to provide annual reports to the state or shareholders, nor does it have to keep a detailed record of every move it makes.

Although choosing an LLC structure is one of the best routes to take, it does not mean that it doesn’t come without its challenges. Therefore, it is advisable to work with an attorney who has experience with business law during the formation of your company.