I know the liability issue is one (it's right there in the name, LLC, of course). I'm assuming that potential clients will see "LLC" and take the business more seriously - but with a greater influx of LLCs - that might not always hold true.
What other reasons should cause me to consider forming an LLC?
Hi Jeanne, I'm sure people will jump right in here with some great answers for you - but I wanted to post a few links to some on-site resources and conversations that you might find useful, hope these help!
I can't wait til I have my 25 posts so I can access that document library, and other stuff! haha.....
I just had this conversation with the former owner of the company I currently work for. he's such a wonderful resource for me. He strongly suggested that I form an LLC for personal liability and also because the tax rates are better. He recommended I speak to an accountant to be sure but after I do more research I will probably follow his advice. However, I already have my sole proprietery EIN so I think I'll operate as a sole proprietor until the end of the year and then change over for the 2009 tax year. I'll be able to do my homework between now and then.
OK - I am going to go against the grain a little bit. I don't think that there is that big of an advantage to going to a LLC, especially for a small company. If you personally are negligant for hurting or causing damage to a client, they are going to come after you personally no matter the form of your company. AND you just end up paying your accountant more to do your taxes. I could go on but those are the 2 big things in my opinion. Talk to your lawyer & get legal advice, however for me, I am not going to waste the time nor money.
I'm currently debating this as well. It seems like when most people sue they sue the company and the owner specifically. One of my attorney friends suggested that I create an LLC just to try to protect some personal interests.
Lawsuits are the reason for having liability insurance. I opted for LLC to protect my assets and also to give my business a stronger sense of 'legitimacy.' The filing fee in Colorado was negligible so, well worth it.
And, it doesn't cost me additional for accounting fees since I do my own taxes through Turbo Tax.
If you are a single-member LLC then there is no difference in the way you file your taxes as a sole-proprietor. A single-member LLC is a disregarded entity for tax purposes therefore you are actually filing your taxes as a sole-p. The only real benefit to being an LLC is added protection of your personal assets should you be sued. You can still be sued personally, but you are only liable up to the amount of your assets in the company. That is why most small business owners, especially in real estate, set up a separate company for each property they own rather than putting them all into one. Also, as Lily said it gives your business some added legitimacy.
Here is a really good article I found on the reasons for creating separate entities to protect your assets.
What advantages are there to forming an LLC?
Re: What advantages are there to forming an LLC?
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Lily Chambers, The Virtual Office Goddess, LLC
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