There’s a certain amount of risk that comes with owning a business. Accidents can happen no matter how well a company is run, and a lawsuit could prove to be devastating if the business is found to be at fault. This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing the potential benefits of establishing an LLC:
A limited liability company (LLC) is a business structure that offers many of the same legal protections as a corporation. Establishing an LLC creates a separate legal entity to help shield a business owner’s personal assets from lawsuits brought against the firm by customers or employees. In theory, the financial exposure of the owners (members) would be limited to their stake in the company, but exceptions may include any business debt they personally guarantee or misdeeds (such as fraud) they carry out.
Just like a corporation, an LLC can lose its limited liability if the owner does not follow formalities that continue to exhibit the separate existence of the business — which is known as “piercing the veil.”
Beyond liability protection, there are some additional benefits associated with LLCs:
An LLC is a pass-through entity for tax purposes, so a firm may pass any profits and losses to the owners, who report them on their personal tax returns.
Members can elect whether the LLC should be taxed as a sole proprietorship, a partnership, an S corporation, or a C corporation, provided that it qualifies for the particular tax treatment.
Starting an LLC may help a new business appear more professional than it would if it were operated as a sole proprietorship or partnership.
In most states, an LLC is easier to form than a corporation, and there may be fewer rules and compliance requirements associated with operating an LLC.
The management structure is less formal, so a board of directors and annual meetings are…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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