question.jpgIn Business Law

What are the advantages of setting up an LLC?

One of the largest advantages to setting up an LLC is that the process is less formal and rigid than for setting up corporation. However, the owners do not have to give up the limited liability protection afforded to corporate owners, meaning LLC owners are similarly protected from being personally liable for most losses and debts of the business itself. LLCs also use the same type of pass-through taxation used by partnerships, which is an advantage for many smaller businesses (and if the corporate-like double taxation would be more beneficial, you can always elect to have your LLC taxed in that way instead).

LLCs also provide you more flexibility in terms of how the business is controlled and managed. There are not as many formalities as there are for corporations, and you have more options about how each LLC owner is involved (whether they are simply an investor or have management control). You also have more flexibility with financial aspects of the business - for example, while corporate laws provide strict rules and regulations on how corporate profits and losses are distributed, LLCs are generally freeer in determining how they want to make such distributions.