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Is it advantageous to structure your company as an LLC?

On Behalf of | Aug 27, 2022 | Business & Commercial Law |

When starting a new business, you want to do all you can to minimize your financial liability if a problem should arise. One way to address this right from the start is by choosing the ideal legal entity (or structure) for your company.

The limited liability company (LLC) model is the top choice for many businesses because, as its name implies, it limits your personal liability. For example, if your company falls behind with creditors payments, the LLC entity protects your nonbusiness assets.

What other advantages does an LLC provide?

Asset protection is a top benefit of the LLC entity, but it is not the only advantage. Three other benefits include:

  • Tax advantages: You can opt to have company profits pass directly to you and other members (if any) without government taxation. Each LLC member will pay profit taxes on their individual income tax returns instead. This strategy makes it easier to file your business tax returns.
  • Ease of startup: It is remarkably easy to set up an LLC. The documentation requirements are minimal, and the costs are not prohibitive. After paying the initial expenses of forming the LLC, you may need to pay additional fees each year.
  • Administrative flexibility: You and other members may manage the administrative side of company operations or hire an outside management professional. In many cases, an LLC is member-managed by default. Check your local laws to see if this applies to your business.

Don’t forget that you have other options to choose from when deciding which legal entity to create. Seeking legal counsel is an effective way to explore these options. Increasing your knowledge of Arizona business and commercial laws can also help guide you.