When you start a business, you have many choices when it comes to the legal formation of your company. One type of legal business entity that is particularly common in modern times if the limited liability company, or LLC. The following are some reasons why many new business owners are choosing an LLC over other types of business entities.
Greater credibility – Though there are numerous successful sole proprietorships and partnerships (businesses that have not been formally established), forming an LLC can add credibility to your company and increase the trust of potential customers or clients. Every LLC must identify its legal formation in the business name, so clients will know you have registered your business with the state.
Simple setup and maintenance – In order to set up an LLC, you must choose a company name and register your company with the office of the Washington Secretary of State (SOS)1 and pay a nominal fee. Though you do have to file certain forms, the amount of paperwork that you must complete is substantially less than that involved in forming a corporation. Additionally, the requirements of maintaining an LLC are much less than a corporation. For example, you will not have to hold annual elections or meetings or file reports.
Protect your personal property – If an owner of a sole proprietorship or partnership cannot pay business debts, their personal assets and property may be used to pay the debts. Owners of an LLC, on the other hand, are not personally liable for business debts, except in very limited circumstances. Forming an LLC can protect you home and personal accounts from seizure.
Pass-through taxation2 – Owners of corporation may be subject to double taxes, while owners of an LLC are not. Instead, you may simply claim your business profits on your personal return (taxes “pass through” to the owner). Therefore, an LLC owner receives the tax benefits of a sole proprietorship with the liability protections of a corporation.
These are, of course, only some of the benefits of an LLC. If you are deciding on a type of business entity, please call the Dickson Frohlich Phillips Burgess in Seattle or Tacoma for assistance. Our experienced business attorney can guide you through the formation process, so call today at (206) 621-1110 or (253) 572-1000.