Limited Liability Companies Offer Protection and Flexibility

The limited liability company – or LLC – is one of the most popular legal structures for a business today. An LLC offers the personal liability protections of a corporation, meaning the personal assets of members are insulated from claims against the company in most cases. It also has great flexibility when it comes to how the business is taxed and how profits and losses are passed through to the owners.

Is the LLC the right business structure for you? There are several factors to consider:

Complexity and Expense
LLCs tend to be about as expensive as a corporation, but the process for setting one up is much less involved. The rules and procedures for establishing an LLC are set out in state law and penalties for not following the law can be severe. Owners of an LLC may need more professional guidance (especially on organizational and operation decisions), which increases costs.

Owner Liability
Except for fraud or other cases of wrongdoing, the owners of an LLC are generally not held personally liable for the debts and obligations of the business. Just as with the shareholders of a corporation, their risk of loss is limited to what they’ve invested in the company. Owners of small, closely held, or newly organized LLCs may be required to give personal guarantees of repayment to secure financing or credit.

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