Pros and Cons of Limited Liability Company

Pros and Cons of Limited Liability Company

Acknowledgement of pros and cons of Limited Liability Company is very important before you start your business organization or company. Limited Liability Company is one of the type of business ownership. Have a quick go through our article on that.

Before starting pros and cons of Limited Liability Company, let’s have an overlook on what it actually is? If you have already read our article on types of business ownership or you are already familiar with the concept and structure of Limited Liability Company. You are good to skip the next section.

Limited Liability Company

Limited liability Company also famous as LLC is another type of business ownership. The taxation is much different as compared to the single-entity method of corporation. LLC is considered to be more effective and provides flexibility to the nature of partnership. An article of organizations document is required to file with your secretory.

In addition to this, sometimes you are required to file an operating agreement as well. Operating agreement means how the LLC is structured. Doctors and lawyers mostly follows LLC form of business ownership. LLC formation rules vary state to state, that’s why you need to know the formation if your business will expand to other states as well.

Creating LLC based organization or business instead of corporation is a better choice. One example is less paper work in LLC. LLC form of business ownership is famous for doing business online.

Advantages and Disadvantages of Limited liability Company

Advantages:

Following are some of the pros of Limited Liability Company that can motivate you to start as one.

  • Flexibility in the structure of Limited liability Company is its top-notch benefit
  • Limitation in the potential liability that protects your personal assets if someone get negatively affected due to your business
  • Limited liability Company allow you to change the structure of tax you are paying
  • If you have not paid your business debts, Limited liability Company will try to protect you as much you can unless you personally guarantee them
  • Board of directors and annual meetings are not compulsory requirements
  • If owner wants to leave the LLC or dies, LLC isn’t effected and goes on smoothly
  • Creating administration is easy as you need to choose the state and get an EIN number after filing with the secretary of the state
  • There is no limit in Limited liability Company about the number of parties or members. You can expand as much as you want

Disadvantages:

  • Annual meeting and filing annual final report is required in order to keep your Limited liability Company in good standings
  • If member of LLC wants to leave or in worst case goes bankrupt or dies, the legal obligations are left as a responsibility for the remaining members and they have to face it. Moreover, LLC must be dissolved.
  • There is an annual fee to keep your LLC current and a first time fee to file your LLC with the state
  • Additional excise and franchise taxes
  • Double taxation is no doubt not an issue in LLC, but pass-through tax is an inclusion
  • You have to pay tax to the state for your LLC if you have created in a state where you don’t live or do business
  • Each Limited liability Company member have to pay tax according to his/her share of profit
  • LLC isn’t a welcoming platform for new investors which can make it difficult to raise capital

These were some important pros and cons of Limited Liability Company and we hope that you like our sharing. Keep visiting for more interesting content related to entrepreneurial and business tips. Visit our earning section for some classy business advices form our experts.

This Post Has 4 Comments

  1. Thanks to this i got a few questions anwsered, but one that is sort of off topic sort of not, sticked. What are the best company types that would go with the LLC structure?

    1. Thanks for your comment Olliver. Are you asking for Companies Examples that are working on LLC structure?? We can’t understand what you mean by “Company Types” that have LLC Structure.

  2. Neat blog! Is your theme custom made or did you download it from
    somewhere? A design like yours with a few simple adjustements would really make my blog stand out.
    Please let me know where you got your design. Kudos

    1. Thank you for appreciation. I have used OceanWp theme.

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