Article Document

Close this search box.

By Mike Broemmel

The benefits of a limited liability company

Launching a startup business venture is an exciting experience. The process is also hard work are requires making important decisions that impact the ultimate success of a new venture. One of the primary, initial decisions an entrepreneur must make when launching a new enterprise involves a determination of business organization.

An entrepreneur can utilize one or another different types of business organizations for a new venture. These include a sole proprietorship, a corporation, a partnership or a limited liability company, also known as an LLC. The LLC is a popular business structure in this day and age because of the various benefits associated with structure.

Ease of organization

An LLC is easy to establish. Although the laws governing LLCs vary somewhat from one state to another, the provisions regarding establishing a LLC are similar.

An entrepreneur establishes a LLC by filing articles of information with the appropriate state agency. In most U.S. states, this is the office of the secretary of state. Indeed, all states offer an online portal through which articles of organization can be completed and electronically filed in a very short amount of time.

Tax benefits

One of the drawbacks of some other types of legal organization is what best can be called double taxation. For example, with certain types of corporations, taxes are imposed at the corporate level and at the shareholder or owner level as well. In other words, taxes are imposed twice.

With an LLC, the owner or owners of the business are taxed once, via their personal return. There is no tax at the level of the business itself. The tax obligation is said to pass through to the owner or owners of the business.

Liability protection

This is what some people call a "lawsuit happy" era in history. Businesses are sued with surprising frequency.

By establishing an LLC, an owner's personal assets are protected. If a person sues a bona fide limited liability company, he or she is restricted from seeking any judgment from the assets of the company. That individual cannot go after the personal or other separate property of the owner or owners of the business.

Ease of operation

From a legal standpoint, an LLC is easy to manage and operate. No significant amount of record keeping is required of an LLC. This differs sharply from a corporation, which tends to be a paperwork intensive form of a business organization.

As a general rule, a corporation is required to maintain what can amount to an extensive amount of paperwork on an annual basis. This includes everything from minutes of meetings of the board of directors to more complicated annual reports.

On the other hand, the record-keeping elements of a LLC are far less onerous. The most significant document associated with an LCC is a very simple annual report filed with the secretary of state or other designated agency. As is the case with the articles or organization, the annual report can be filed electronically, using a standard form, through a user-friendly online portal in all states.

Article sources

Cornell Law School

American Bar Association

Share on:

Recent Articles

Join Our Newsletter

Subscribe to our newsletter to receive the newest blog posts. No spam.
Email *

Write For Us

Interested in becoming a contributor on Article Document?

We’d love to display your work and show off your expertise!