We’ve all heard of LLC businesses, but what exactly is an LLC, and what are the benefits? I invited the experts from Web Success Portal to sit down for an interview where they can explain what an LLC is, what the benefits are, and why business owners and entrepreneurs should consider forming an LLC.
Web Success Portal is a team of experts dedicated to improving businesses every step of their journey. From LLC formation to marketing in the digital age, Web Success Portal has you covered. Alright, let’s see what they had to say about LLC formation.
So what are the options that a single business owner has when it comes to the structure of their business?
Well, they can either form a Sole Proprietorship or an LLC. Both are great options, and it really comes down to the business owner and the business type. Sole proprietorships are riskier for the business owner because you take on all the risk.
You are pretty much putting your assets on the line for debt and financial obligations that your company faces. With an LLC, your business’s assets are at risk but not your personal assets.
Are there any downsides to forming an LLC?
The only real major downside to forming an LLC is the initial paperwork and fees for actually forming it. Other than that, there are so many benefits to forming an LLC that, most of the time, you’re doing yourself a disservice by not forming one.
The LLC will free you from any company debt or liabilities while staying simple and easy to manage as far as taxes go. Many people hear LLCs and think that it will complicate everything, so they’d rather stick with a sole proprietorship or partnership when that’s just not the case.
So LLCs don’t pay more in taxes than sole proprietorships?
No, they absolutely do not pay more in taxes. That’s a common misconception. You will pay the same amount of taxes on an LLC as you would in a sole proprietorship. In taxes, LLCs are taxed on what is called “pass-through taxation”.
This pretty much means that your business’s profits are passed along to you as income. So you end up paying income tax on your profits, which you would’ve done anyways with a sole proprietorship. The only added expense is the financial and time expense that you spent setting up your LLC.
It sounds like LLCs are better then because there’s less risk with no added tax cost. So when should someone go with a sole proprietorship?
There is a lot less risk with an LLC, as we’ve gone over. At Web Success Portal, the only time we’d say it’s better to go with a sole proprietorship is when there is literally zero risk with your business.
If your business is pretty much a hobby, like selling knitted collectables or something similar to that, then you might as well stick with a sole proprietorship because you will not go into debt doing that, and no one is going to sue your business for any reason.
Are there any hidden benefits to forming an LLC that isn’t as straightforward as saving money on liabilities?
Well, you get a little more flexibility with the structure and employment of your business, for one. Secondly, it increases your business’s credibility in the eyes of customers and other businesses you may work with.
The credibility aspect is huge. Other businesses, especially, trust LLCs a lot more than sole proprietorships because they just come off as more credible.
