Choosing a corporate form is one of the first and most important decisions you’ll face when starting a business. Limited liability companies, or LLCs, are a popular choice for many small businesses, balancing the tax advantages and easy reporting requirements of a sole proprietorship with the legal protections of a corporation. But it’s not a choice to be made lightly. Understanding the benefits and drawbacks of LLCs will help you and your attorney decide whether this form is right for you.

A Brief Guide to LLCs

What Is an LLC?

Like corporations, a limited liability company is a separate legal entity from its owners, which provides substantial protection against personal liability. For instance, LLC members aren’t responsible for business debts and usually can’t be named in liability suits. Because creditors won’t be able to pursue your individual assets in a default, the protection LLCs provide dramatically reduces the risk of starting a new company.

Tax Benefits

LLC owners can choose to register their businesses as S-corporations or C-corporations, each of which may have tax advantages in certain situations. S-corporations are considered “pass-through” entities, with income reported on each individual member’s tax returns. C-corporations are subject to corporate tax, and income is taxed again when it’s distributed to shareholders. Deciding which tax structure to choose requires an in-depth understanding of the code, so it’s best to consult an attorney before deciding.

Compliance Requirements

Most states require corporations to submit extensive documentation every year, which can be onerous for many small businesses. LLCs, on the other hand, typically have much simpler requirements. In Georgia and many other states, renewing your registration is usually as simple as paying the annual fee, with no further documentation required.

The best corporate form for any business depends on a variety of factors, including your industry, expected revenue, and whether you plan on seeking outside investors. Since 1998, the attorneys at Little, Bates, Kelehear & Toland, P.C. have helped entrepreneurs throughout the state of Georgia understand their options before choosing the form that maximizes their chances of success. Call (706) 278-0525 to consult with an experienced business attorney today.