Have you been wondering about the future of your business and whether or not it’s worth it to turn your company into an LLC? If so, you clicked on the right article to help you decide. As you may already know, turning your company into an LLC has many benefits; the main one being that all your personal belongings, such as your car, savings, house, etc., will be protected in case the company gets sued. To form an LLC, you can have many members and businesses, meaning there is no limit to the owners. Although creating an LLC might sound like the best thing for your business, one should not be hasty but rather weigh all the pros and cons. So, keep on reading to find out if you’re ready to turn your company into an LLC.
The Pros of Forming an LLC
Simplicity
One of the reasons that may hold you back from making changes to your business is the paperwork and all the legal hoops you have to jump through to get to the finish line. Luckily, with an LLC, simplicity is the key ingredient. Rather than going through countless documents, keeping track of meeting minutes, or holding numerous board meetings, you can focus on other essential procedures that benefit your company. The process of forming an LLC is quite simple, and although recommended, you do not need to hire experts to help you with the paperwork. In addition, less paperwork to go through means reducing carbon footprint and extra fees.
Limited liability
The main benefit that might have caught your attention regarding an LLC is the limited liability part. This means that you separate your personal finances from the company’s. And in such cases, the company might get sued, your personal assets will be protected, and members aren’t accountable for the company’s actions. Choosing an LLC service might take a bit of time and research, but it’s worth it when you know your company is in good hands.
Flexibility in management
Having a business doesn’t necessarily mean you have to be the one to manage everything, especially if you want to focus on other aspects of the company. As mentioned by Doola, the good thing about forming an LLC is that any member can manage the company, even outsiders. So, you can hire more experienced people to manage and handle procedures requiring day-to-day decision-making.
The Cons of Forming an LLC
Members are taxed individually
Unless the members of the LLC want to be taxed as a corporation, your LLC will be considered a partnership for tax purposes. The government considers the members of an LLC as self-employed, which means that each member is individually responsible for paying taxes such as Medicare and Social Security. These payments are considered self-employment tax which applies to your profits.
The limited liability can get broken
Yes, an LLC’s very essence can get broken, and members can lose the limited liability protection. This happens in cases of committing fraud that will harm others or if a member mixes their personal finances with business ones. In such cases, a judge has the right to break the limited liability protection, and a member can lose their personal assets.
The LLC is dependent on all of its members
Having many members for an LLC can be both an advantage and a disadvantage. This is because if a member chooses to leave the company, goes bankrupt, or passes away, the LLC has to be shut down, and you must start over a new one. The remaining members are also responsible for any and all fees required to terminate the LLC.
Final Thoughts
At the end of the day, many decisions that you make for your company will inevitably have pros and cons, and sometimes you just have to take a leap of faith (after consulting with experts and your co-owners). After reading all of your pros and cons in terms of forming an LLC, you still know what is best for your company and its growth. So hopefully, you’ll make the right decision.
