Your Business. Your Questions. Our Solutions.

Why are LLCs such a popular business formation option?

On Behalf of | Sep 28, 2023 | BUSINESS & COMMERCIAL LAW - Contract Disputes

If you are thinking about starting a new business, it’s critically important that you evaluate the pros and cons of different legal structures before committing to one over the others. When engaging in this evaluation, you shouldn’t overlook limited liability company (LLC) structure as an option.

All too often, new business owners simply assume that they should form a sole proprietorship or a partnership because one requires no legal setup and the other is a term that is commonly used and understood in public discourse. Yet, LLCs are relatively easy to set up, can be utilized by one or multiple owners (called members) and offer a big benefit that sole proprietorships and partnerships do not.

Personal liability protection

When sole proprietorships and most partnerships are formed, the owners of those enterprises do not benefit from any personal liability protection in the event that their business is sued, is fined by the government or falls so deeply into unmanageable debt that bankruptcy becomes a necessity.

Corporations offer personal liability protection for shareholders, but not every venture should be structured as a corporation. A local business run by a married couple probably doesn’t need a board of directors and strict government oversight, for example.

LLCs offer the “best of both worlds.” Their management structure is flexible, they can be taxed as pass-through entities or as corporations, they aren’t heavily regulated and they offer their members personal liability protection in the event that business-related financial challenges arise.

An LLC structure may or may not be right for your business. But, it is certainly an opportunity worth considering as you seek to move forward with your new venture.