Benefits of Forming a Limited Liability Company

Business Attorneys

Limited liability companies, or LLCs, are the most modern form of business entity. Consequently, LLCs provide their members with several benefits that are not found in older business entity forms, such as corporations or partnerships. These benefits include:

  1. Limited liability, which protects the personal assets, such as a personal bank account or house, of the LLC member;
  2. Pass-through taxation, which passes all profits and losses through to the individual member’s personal income tax returns;
  3. The ability to obtain a state tax ID or federal employment identification number (FEIN), which are often required to open a business bank account or to contract with their parties, such as vendors and distributors;
  4. Fewer corporate formalities, such as yearly meetings, meeting minutes, and annual requirements imposed by the state;
  5. An almost unlimited ability to creatively structure the operation of business, whether by managers or members; and
  6. Fewer restrictions on number of members.

LLCs may have some disadvantages, however. Venture capitalists and other investors often favor corporations over LLCs so that they can easily obtain preferred stock. Depending on the state, filing for an LLC may also be expensive. California requires that all LLCs pay a yearly franchise tax of at least $800, while Illinois charges $500 to file an LLC’s Articles of Organization with the state. Finally, unlike corporate case law, which has been gradually evolving over the years, there is less case law precedent concerning LLC’s, which may create uncertainty depending on the facts of the dispute.

Overall, LLCs are typically the favored entity for a small business or startup. If would like to know what form of business entity is right for you, contact one of our expert attorneys today.

Extra, Extra!
Recent Posts

2025 Changes to Trademark Fees

2025 Changes to Trademark Fees

Trademark

There are some significant changes coming to the United States Patent and Trademark Office (USPTO) that will affect trademark filings beginning January 18, 2025. These changes include the introduction of the Trademark Center, new fees, and revised application requirements. Here is an overview of the key changes: The USPTO will retire the TEAS system, which […]

Read more about 2025 Changes to Trademark Fees

Automated Decision-Making Technology: California Releases Proposed Regulations

Automated Decision-Making Technology: California Releases Proposed Regulations

Internet Law

In today’s competitive e-commerce landscape, automated decision-making technology is becoming more and more important. From personalized product recommendations to targeted advertising and streamlined logistics, these systems help ecommerce businesses adapt and grow. But new regulations are on the horizon, and these changes could reshape the way e-commerce businesses use automation. The California Privacy Protection Agency […]

Read more about Automated Decision-Making Technology: California Releases Proposed Regulations

FTC Adopts Final “Click to Cancel Rule”

FTC Adopts Final “Click to Cancel Rule”

Internet Law

The Federal Trade Commission (FTC) has issued final amendments to its trade regulation rule concerning negative option plans, also known as the “click to cancel rule.” This rule aims to address widespread deceptive practices that prohibit customers from cancelling services in the same manner in which they signed up. Here’s a detailed summary of the […]

Read more about FTC Adopts Final “Click to Cancel Rule”

Put Revision Legal on your side