The most common reason why people go for a limited liability company set up is because starting it is usually easier and faster as compared to customary incorporation. The requirements are not many and the process is not complicated. Also, there is less paperwork to be done! In Tennessee, the Secretary of State only requires nothing more than a few basic information about the company as well as minimal mandatory fees for the registration of an LLC. This may be the same with other states.
A limited liability company has the same legal protection as that of a corporation. However, what is most appealing about this form of business is that its owner is distinctly protected from business liabilities. For instance, when a law suit is filed against the LLC and the company loses in this suit, the owner’s personal assets are not at all affected. A surety or guarantor relationship, if not expressly entered into by the parties, is not recognized under this type of company. Hence, the owner’s assets will never be at risk if the company suddenly becomes bankrupt or incurs debts.
If that is not yet enough reason to go for LLCs, tax filing requirements and documentation obligations are also found to be more relaxed in this type of business compared to corporations. Under this form of enterprise, the proprietors do their individual tax returns. However, they can still opt to pay their tax according to how corporations pay theirs. In simple terms, going for a limited liability company comes hand in hand with a “check-the-box” taxation which gives the owner the freedom to be taxed the way he wishes to.
Although the following reasons are indeed engaging for business owners, it still has to be considered that a limited liability company set up may not fit certain enterprises. So before one registers his company under an LLC form, it is still best to first study the compatibilities and corresponding advantages and risks that entering into such type of business entails.