The Pros and Cons of Starting an LLC

A lot of people want to start their own businesses, be entrepreneurs, pursue the American dream, have their own LLC, and generally be successful. However, I would say that for every twenty Americans who wants to get started on something like this, only one of them actually makes it go right and gets it done. With this in mind, I thought I might say a few words about LLCs to clear the air on them and perhaps to answer some peoples’ questions about them. A lot of people don’t seem to know about them, even if they want to have one of their own.

One thing I can say right off the bat is that, if you’re considering becoming an entrepreneur of any kind or of owning your own business, LLC or not, I say go for it! The level of happiness and sense of accomplishment to be had from owning your own business and being 100% the master of your own fate and destiny and of being the one who absolutely calls the shots on how you do in life in general is on a completely different level than anything most people can achieve by just working for a company that they do not own.

 

LLC Business-Plan

The Pros of an LLC

LLCs have a few great things going for them. For example:

1. LLCs have great tax flexibility. This is the first thing you will always hear about the benefits of an LLC. The IRS does not actually consider an LLC to be a distinct, separate entity for tax purposes. This means for you that, at least initially when you are first getting started and for the first few years of your business, the IRS will not tax your LLC directly. Instead, members of the LLC get to determine how they want to be taxed themselves, and they can pick and choose from several different options to pick the ones that work best for them.

2. LLCs have much less paperwork. Compared with other, more complicated and more advanced business models like C-Corps or S-Corps, LLCs are very, very flexible. They can be applied to almost any type of business model. Don’t forget that you’ll want to have an LLC Operating Agreement, (pretty rudimentary stuff really), so you can create the actual rules that govern your own business. Just having the freedom to create these rules is a great plus point.

3. LLCs offer limited liability. Like corporations but on a smaller scale, LLCs provide their members protection from liability, which is a huge perk. This essentially means that members are not personally, (as themselves), liable for debts and any court judgments that might be brought about or incurred by the LLC itself. This means that your personal assets are safe, and creditors can never take your belongings or the belongings of other members of the LLC.

The Cons of an LLC

For everything good that an LLC has going for it, there are a few bad things too. For example:

1. LLCs carry with them self-employment taxes. Truthfully, unless you choose to be taxed like a corporation, (which can be a good decision depending on certain factors), LLCs are usually subject to self-employment taxes of some kind or type. This means that the profits and whatever they entail of the LLC itself won’t be taxed at the corporate level, but rather will fall on the shoulders of its members who will have to own up and account for those profits on their personal federal tax returns themselves. Now granted, self-employment taxes aren’t the end of the world, but it is something to contend with.

2. Sometimes there can be some confusion about who holds what position in an LLC. When you have a corporation it tends to have very, very specific roles within it, (like directors, managers, and employees just to name a few). However, LLCs generally do not have titles like these. Sometimes this can make it confusing for shareholders or investors, but this is a hurdle that can be jumped and handled too, and it not permanent.

3. LLCs don’t always live as long as a corporation does. If one member of an LLC jumps ship, it can often disband the LLC per the law. This can be addressed and handled too, like the above, but is just takes a little extra work.

I encourage anyone who wants to start an LLC to go for it and just get it done. There’s really no reason to hesitate, and there is plenty of other data out there about them in case one wants to learn more about them before one proceeds. The key to success in the American workplace is to own one’s own business though, and starting an LLC is a great way to do that.

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