Business formation types that limit personal liability

On Behalf of | Jul 25, 2018 | Uncategorized

If you are a resident of Pennsylvania who is looking to establish your own business, you may be giving some close consideration to exactly what type of business structure you want to create. Different business structure types offer different benefits and drawbacks, but if minimizing the amount of personal liability you have in your business is a concern, you may find some structures more appealing than others.

For example, two particular business structures, the limited liability company and the S corporation, reduce the degree of personal liability you have in your business, but there are some important distinctions that exist between them.

The limited liability company

Establishing a limited liability company is one way to protect your home, your car and other valuables if someone files a claim or lawsuit against your business. In other words, creditors cannot come after your personal possessions if you have existing business debts, should you opt for this type of business structure. LLCs are also relatively simple to operate, which many business owners view as a benefit. A potential drawback of this type of business, however, is that it can make it difficult to secure investments, because most investors prefer to place their funds into corporations.

The S corporation

In some ways, S corporations are not unlike LLCs, because they, too, reduce the degree of personal liability you have in your business. They do, however, offer different advantages and downfalls. One main benefit of S corporations is that they can prove advantageous come tax time, but another main drawback is that there is often a lot of housekeeping involved in maintaining this type of business structure. For example, S corporations must have a board of directors, and they also must host annual board meetings.

While both business structures mentioned can help reduce personal liability, whether one might work better for your intents and purposes depends on numerous factors, such as the type of business you operate.


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