8 Reasons to Register as an LLC

If you’re an existing business of any size, you’re probably required to register with your state’s filing agency. There’s little reason not to register. In most cases, the costs associated with registering are minor.

The toughest part might be figuring out the best business registration option to choose. Registering as a limited liability company or LLC is probably the best option for your business. Here are a few reasons why.

IT’S SIMPLE TO CREATE

In some states, forming an LLC is as simple as going to a website, answering a few simple questions, and paying a filing fee. In other states, the process isn’t quite as easy but if you need to hire a business registration company to help, don’t expect to get a large bill. Some companies will help you register your business for less than $50.00

IT LIMITS YOUR LIABILITY

As the name implies, when you register as an LLC, you are no longer personally liable for adverse events that take place in your company. If your company is sued or files for bankruptcy, the creditors cannot try to collect your personal assets.

While this is an advantage, there are plenty of exceptions. If your lender writes a clause into a contract or other situations exist, you could be liable but as long as you run your LLC correctly, your personal assets are safe.

PASS-THROUGH TAXATION

Your company will likely not pay taxes on its income. The tax is “passed through” to you. Other business entities are required to pay taxes at the business level. As the owner, you would pay business taxes and personal income taxes once you paid yourself. An LLC avoids double taxation.

LESS PAPERWORK

LLCs require very little state-imposed paperwork. Often, business owners pay an annual fee, update their contact information, and answer a few questions. Of course, each state varies but what is consistent is that the paperwork for an LLC is much less than an S or C corporation.

SIMPLE MANAGEMENT STRUCTURE

Does it seem a little silly to have a board of directors for your startup? An LLC allows you to choose the management structure you would like. Some other registration types require you to have a board of directors, formalized meetings with minutes, and other formal practices not appropriate for small, one or two-person businesses.

OWNERS CAN BE ANYBODY

S corporations, for example, place restrictions on the amount of owners. With an LLC, there are very few restrictions (even foreign entities can own an LLC). Because states vary in requirements, your state may have stricter requirements than some.

SOMETIMES IT’S REQUIRED

Bidding on government contracts? It’s likely that you have to be a registered business in order to land the contract. Other companies may require it as well. You don’t have to be an LLC but you do have to be registered.

MORE CREDIBILITY

With unemployment still substantial, many people who are out of work are forming businesses. This has served to diminish the notoriety of being a business owner. Forming an LLC separates you from the people who aren’t committed enough to invest the time and money into being recognized by their state. A business that is registered has perceived professionalism, ethics, and longevity.

Forming an LLC isn’t right for every business. Go to our website for more information about how to form an LLC.