When starting a business, one important decision is the choice of business entity, such as a limited liability company, corporation, partnership, non-profit corporation, or some other entity. Each have different governance and tax ramifications. If you are not sure what is best, it is always advised that you seek the help of a CPA and an attorney. One of the most popular entity selections for small businesses is a limited liability company.
What is a Limited Liability Company?
A limited liability company – LLC – is a business entity that has many benefits. It combines some of the best aspects of corporations, sole proprietorships and partnerships. Those benefits include:
- You can form an LLC in any state, including Georgia.
- The LLC avoids the double taxation that you get when you incorporate because the default tax treatment is as a pass-through entity.
- The entity can protect your assets if it is appropriately established and operating.
- It is easy to register an LLC, easy to make changes to it, and easier to manage than a corporation because the required governance is less.
When You Might Choose to Form an LLC
If you are looking for an easy business structure, the LLC might be ideal, if you:
- Don’t wish to have the governance of a corporation which includes naming a Board of Directors and Officers; or
- Want to avoid double taxation; or
- Want the flexibility to elect different tax treatment in the future.
The Disadvantages of an LLC
The LLC can have disadvantages. Because of the way the structure is set up, unless you elect different tax treatment, members of the LLC receive the net income and must pay self-employment taxes. Additionally, if you don’t draft an operating agreement or if one is not properly drafted, the default state laws apply and in the event of a disagreement among members, it could be difficult to resolve the matter. You could find yourself in a position where you might have to negotiate a buyout or dissolve the company.
Contact Us
If you are ready to start a business and need to choose the entity that works best for you, contact us today at Grissom Law, LLC at 678.781.9230. We will work with you to understand your needs and choose the most appropriate business entity for your needs.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.