Choosing the right structure for your business is an essential step toward its future success. Several options exist for Pennsylvania business owners, each offering its own pros and cons. Your choice may depend on your type of business, its size and your future plans for it.
The Limited Liability Company structure offers several benefits for small business owners. While a general overview can help you start, discussing specifics with a qualified attorney can give you a deeper understanding of what you need to consider.
Protecting personal assets
Setting up an LLC can protect the owner from becoming personally liable for issues involving the company in most situations. If someone files a claim against the company, he or she cannot come after the owner's personal assets.
Less formality gives you more control
One significant advantage of the LLC structure is its relative flexibility and lack of cumbersome formalities. Such a company may have one owner or several who do not have to go through various technicalities every time they want to make a decision or take action. Filing taxes for an LLC is also relatively simple, as the owner generally uses his or her own personal tax returns to report the company's income and losses.
Keeping yourself protected
In some situations, an LLC owner may lose the protection it affords for personal assets. The good news is that these situations are generally within the owner's control. Some actions that may result in loss of protection include the owner personally injuring someone, purposely engaging in fraud or illegality, failing to properly handle taxes withheld from wages, failing to keep the LLC's finances separate from personal finances and personally guarantee a business loan. A business lawyer can help you set up your company and avoid making mistakes that could make your personal assets vulnerable.
An operating agreement can give structure without burdensome formalities
Unlike a corporation, an LLC does not have multiple formal rules about decision-making and procedure. However, most businesses, especially as they grow, do need some structure and rules. An operating agreement can help you cover important areas and address your business's specific needs.