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Once your small business develops a list of clients or starts attracting investors, you might be ready to take the next step. In most cases, this includes transitioning from a sole proprietorship to a formal business structure, such as an LLC. If you’re not sure how this would affect your enterprise and why you should consider it, dive into the guide below before meeting with a tax attorney.

What Is an LLC?

LLC stands for Limited Liability Company. It’s much more common to go from an unregistered small business to an LLC than something like a corporation. That’s because LLCs are the easiest way to classify your company to separate your personal assets from your business ones.

These types of businesses may be owned just by you, or you may have a multi-member LLC, owned by you and one or more partners. Compared to a sole proprietorship, having an LLC after your company name will make your business look more professional to clients and investors.

What Are the Benefits of Forming an LLC?

tax attorneyThe main benefit of restructuring your small business as an LLC is to gain financial protection. If someone sues your business when you’re a sole proprietor, your personal asset—such as your car, vacation home, and savings account—will be lumped in with your business assets, such as your office and revenue earned from your services.

If they won the lawsuit, the court could use both your personal and business assets to compensate them. By forming an LLC, your personal assets will be considered separate, and only your business assets will be up for grabs. 

In addition to liability protection, forming an LLC requires less paperwork than corporations and doesn’t require you to appoint a board of directors and other figureheads. Corporations are also subject to double taxation, while LLC profits are given directly to the company’s owners and are only taxed once.

 

If you’re eager to form an LLC, reach out to Lance S. Cox, Attorney at Law of Cincinnati, OH. For over 30 years, this tax attorney has helped commercial clients make sense of their current classification and build a strategy for future growth. With his advice, you can face tax season with peace of mind. To learn more about this trusted lawyer, visit the website. You can also call (513) 528-6000 to schedule a consultation with this tax attorney.

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