If your business is set up as a sole proprietorship in California, you may be surprised to discover the advantage of an LLC. Changing your sole proprietorship to a Limited Liability Company (LLC) may be in your best interest. A Limited Liability Company protects a business owner from personal liability associated with the business. There are many different types of business entities in California. With some many choices, a business owner may find it difficult in selecting the best one for their business. Read the key advantages of an LLC below if you are interested in creating one.
With an LLC, You Continue to Run Your Business
A key advantage of an LLC is that an LLC allows you to stay the sole owner of your business. This means you can make your own business decisions without receiving approval from business investors, partners, or a board of directors. Similar to a sole proprietorship, you can continue to own and manage your business while structured as a Limited Liability Company. If you have a business partner, you can enter into an operating agreement which details how the two of you will run your business.
An LLC Limits Personal Business Liability
Another key advantage of an LLC is that it limits personal liability. An LLC is viewed as an independent legal entity. This means you will not be held personally liable for the LLC’s debts and liabilities. Your personal assets will not be at risk of loss. You may be held personally liable if you fail to exercise due care which results in harm to another person or business.
An LLC Avoids Double Taxation
A third advantage of an LLC is the “pass through” tax treatment owners receive. Most corporations face double taxation. Not only are the corporations profits taxed as income, shareholders must also pay income taxes on dividends. A California Limited Liability Company allows you to pay taxes once on your personal income tax return.
An LLC Has Less Administrative Paperwork
The fourth advantage of an LLC is that the costs to keep up a California LLC is inexpensive. An annual tax fee must be filed each year in addition to a few forms to keep your LLC status updated. Contact A People’s Choice for more information about forming an LLC and the annual forms and fees you must file and pay to keep up the LLC business status.
An LLC Presents a Professional Image
The last and probably most important advantage of an LLC is that it presents a more professional image. Having you business represented as an California limited liability company makes your company seem more prominent in the business world and could give you an advantage when doing business with larger companies. Many large companies are reluctant to do business with sole proprietors.
Contact A People’s Choice for more information about the advantage of an LLC. We can help you draft and file the documents you need to form an Limited Liability Company in California and get your business up and running quickly!
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