Why an LLC?
Why an LLC?
Forming an LLC is an excellent way for business owners to shield their personal assets. LLCs are also very beneficial to real estate investors. LLCs are one of the best means for holding real estate and other appreciating assets.
Two major reasons for forming an LLC are:
Personal Liability Protection.
The primary reason small business owners and real estate investors choose to form an LLC is to protect their personal assets, such as their home, car or family savings. In the event of a lawsuit or if your business should fail, your personal assets can not be touched, assuming you have properly formed, capitalized and maintained the LLC. This limited liability feature of LLCs is not available in a sole proprietorship or general partnership, where the participants are personally liable for all business debts.
As liability insurance becomes more expensive for less coverage, asset protection is becoming more of a critical factor for entity selection. LLCs provide another layer of complexity, giving you protection for your home and other personal assets.
|The Tort Mess
It’s even worse than you think. Out-of-control lawsuits are shutting down businesses and costing the economy billions of dollars a year.
|Forbes magazine recently published an article stating that in the last decade, “the average jury award in tort cases as a whole has tripled to $1.2 million, in malpractice it has tripled to $3.5 million and in product liability cases it has quadrupled to $6.8 million according to just released data from Jury Verdict Research.” According to BizStats.com, only 22% of all the small businesses in America are corporations or LLCs. Over 72% of business owners are personally exposed to liability risk.Protect yourself!
Flexible taxation: LLCs, by default, are treated as “pass-through” entities for tax purposes, much like a sole proprietorship or partnership. This means that LLCs avoid double taxation. Alternatively, an LLC may elect to be treated like a corporation for tax purposes, whether as a C corporation or an S corporation.
Flexible management: The members have greater flexibility in structuring the limited liability company than is ordinarily the case with a corporation, including the ability to divide ownership and voting rights in unconventional ways while still enjoying the benefits of pass-through taxation.