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.
