Comprehensive. Assertive. Creative.
We don't practice law like the others.

3 reasons entrepreneurs choose to start LLCs

There are multiple different business forms that someone can select when starting a new company. One of the most popular is the limited liability company (LLC). 

Entrepreneurs in a variety of different industries choose to create LLCs when starting new businesses for a variety of different reasons. The three benefits derived from LLCs listed below are among the most commonly reported reasons that entrepreneurs choose LLCs over different options. 

1. Reduced personal liability

As many people can infer from the name, an LLC protects them from personal liability for business matters. If the company fails, the entrepreneur will usually not be personally responsible for its debts. If consumers or employees file a lawsuit against the business, the structure of an LLC limits the likelihood that an owner’s assets or future income will be at risk. 

2. Pass-through profit taxation

Income taxes are a major consideration for anyone starting a business. Ideally, the company will generate profits, and that will create an obligation to pay certain taxes. With an LLC, the owner can first utilize business deductions to reduce their tax obligations. They can then claim the profits as income as an individual, making them eligible for other tax deductions and write-offs. 

3. Ease of establishment and maintenance

Creating an LLC requires filing certain paperwork with the government. People need to have a written business plan and several other formal business documents on record. When compared with more complex business entities, LLCs are relatively easy to create and maintain each year. 

Learning about the benefits of different business types can help entrepreneurs choose the best way to structure a new company.


FindLaw Network
Photo of John N. Spicer and Kristopher Robert Olin