Level Of Risk
Small businesses could face risks such as product liability, personal injury, and/or trademark infringement.
Any business that carries risk needs to be legally separated from its owner.
This separation is known as limited liability protection.
Limited liability protects a business owner’s personal assets (ie., car, house, and savings) in the event that a business is sued or defaults on a debt.
Profit and LLC Taxes
A small business that earns a steady profit can benefit from the flexible tax options that an LLC offers.
LLC owners can choose between pass-through taxation or the S corporation (S corp) tax classification.
LLC vs S Corporation
Being taxed as a default LLC works best for business owners who choose to reinvest profit back into the business and the S corporation (S corp) tax status is best for businesses that want to distribute most of the profit to owners.
LLC vs Corporation
A corporation is only useful for business owners that must rely on outside investors. This is because of the way corporations are taxed.
Any small business that doesn’t need outside investors will do better at tax time by choosing an LLC.
Credibility and Consumer Trust
Small businesses rely on consumer trust and recurring purchases. Credibility plays a key roll in creating and maintaining any business.
Businesses that form LLCs gain a level of consumer trust and credibility simply by forming an LLC.