When you have a small business, you have a lot of things that you need to think about. One of them is the legal aspect of your business. One of those aspects is whether or not you should organize your business as a corporation or a limited liability company or LLC. Knowing what an LLC is can help you figure out if you should choose to set up your business that way or incorporate.
What Is an LLC?
One of the things that separates an LLC from a corporation is the way that they are owned. The way that an LLC is organized, the owners each hold a percentage of the company. In the case of a small business, that could be you and any partners. If you don't have partners, then you can set up people whom you want as part of your company. Some people include their business lawyers as part of their company's organization. One reason to do that is to make sure that any legal issues that come up can be properly dealt with. The percentages each person owns in the LLC are often called membership percentages. Transferring that percentage from one owner to another can be difficult, and may require legal help to do.
Another difference between an LLC and a corporation is that it is what is called a pass-through entity. That means that the profits from your business pass through to you and to any other owners. Instead of filing taxes for the company, you report the profits on your personal income taxes. You will also need to report any losses. On your taxes, you will have to file as a person who is self-employed, meaning the way you are taxed will be different. A good business lawyer or accountant can help you sort out your taxes and makes sure that everything is filed properly.
Navigating the legal issues that surrounded setting up your small business in a way that it can grow can be difficult. There are a lot of questions, including who should be part of your corporation, and how they should contribute. The best way to figure any of that out is to visit a lawyer who specializes in business law. Not only will they help you decide how you should set up your business, they can also help you file any paperwork with your state or on the federal level.