Establishing an LLC or limited liability company is one of the major decisions every business or company can make. This form of business registration has many implications for the operations and management of a company and can ultimately contribute to its success or failure. But the first thing any business looking to set up an LLC should do is get some good advice. There are pros and cons to this type of business registration and setting up an LLC will take time and money, the two most important resources any business has. It is also useful to check options before investing.
The simplest form of business registration is sole proprietorship. This is usually a simple registration of the fact that someone wants to be involved in public commerce and the nature of that business. Unless another permit is obtained from the local regulatory authority due to the nature of the business, this means a trip to City Hall, filling out the necessary forms, paying a minimal fee, and obtaining a business number that allows the company to start. business. The individual owner can then start operations and assume all the obligations and tax requirements of the business.
A more complex form of business registration is incorporation. This involves registering a business as a corporation and issuing shares in the business to other people who may wish to become part of the business. An act of incorporation involves filing an act of incorporation with the state and while individuals can prepare and file it without an attorney, legal and financial advice is usually required to ensure that the paperwork is in order. There should be a Board of Directors, corporation officers and a method for notifying shareholders about ongoing business operations.
Somewhere in the middle of the previous two options is the option to set up an LLC. An LLC is more complex than a sole proprietorship and simpler than an amalgamation. This has some advantages and disadvantages. The disadvantages of choosing to set up an LLC are mostly the time and cost of going through the process. Once a business is established as an LLC or limited liability company, the benefits begin to be felt.
The main reason for setting up an LLC is to protect the owner or business owners from liability. This form of business registration limits the liability of the owners to the level of investment they have made in the business. All debts, responsibilities or other obligations arising or caused by business operations are not their responsibility.
Another major reason to set up an LLC is for tax purposes. Income from a limited liability company is taxable only once and the state collects no additional income tax on the company or business itself. This is in contrast to a C-corporation where income is viewed as corporate and personal and is taxed at both levels when dividends are taken.