BUSINESS FORMATION: How should I file my business entity? There are 3 Major Benefits of Structuring
Structuring your business as an limited liability company ("LLC") or S Corporation (S-Corp) is a very smart move as an entrepreneur. These entity structures can protect your personal assets from your business liabilities like debts and lawsuits. However, other key benefits are available that you may not be aware of.
LLCs and S-Corps actually provide benefits and blended aspects of sole-proprietorship, partnerships and corporations without some of those entity drawbacks.
LLCs and S-Corp: Law governing these entities vary state by state, but generally provide three (3) key benefits:
1. Enhanced credibility
You've probably heard of brand reputation more often than you'd care when creating and running your own business. However, it's important because your brand is your most valuable asset along with your business credibility. Plus, when you start a new business, registering your business gives you instant credibility to your brand's image.
When you make the decision to register your business, others will be more apt to doing business with you because they will know that you're taking your business very serious. Even IRS will treat you differently than if you were a sole proprietor.
2. Liability protection
Unlike sole proprietorship and general partnerships, when you register as an LLC or S-Corp, it gives you instant liability protection for your personal assets. This means that if someone was to sue you, they would only be limited to your business assets, not what you own personally.
However, there's one caveat. Depending on what state you're in, the law for your business entity will require certain maintenance of your business and failure to adhere could lead to someone accessing your personal assets.
Not to worry. Here at SLD, we help you to organize and legally maintain your business structure so that you can maximize your limited liability shield.
3. Tax savings
If you select an LLC as your entity, you will have some flexibility on how you will be taxed. If you choose to be taxed as an S-Corporation, you will not have to pay income tax at the corporate level. If you do not elect be taxed as an S-Corp, then by default you'll be taxed as a sole proprietor if you are a sole member LLC or as a general partnership if there is more than one member of the LLC.
When this occurs, you'll lose some of the benefits that are afforded to you under the business entity and S-Corp election.
Reap the benefits Whether you’re about to launch a new company or are currently doing business as a sole proprietorship or partnership, you should seriously consider becoming an LLC or S Corporation. Not only do these business structures protect you from personal liability, but they also offer incredible advantages unavailable to other entities. Meet with us as your Innovative Business Lawyer today to learn more about how LLCs and S Corps can maximize your company’s success.
This article is a service of SL DeBarros Law Firm, LLC, Innovative Business Lawyer. We offer a wide array of business legal services and can help you make the wisest business choices throughout life and in the event of your death. We also offer a Business Protection Start-Up Session or a Business Planning Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.