You might be evaluating the possibility of creating a limited liability company (LLC) or a corporation. While each business formation offers unique benefits, there are some standout differences among these two business formations, affecting everything from liability, taxation among income allotment, among others.

What Is a Limited Liability Company?

An LLC is a business structure where individual owners are not accountable for the company’s debts. A closer look at the LLC model shows that they are essentially a hybrid legal entity with the characters of a sole proprietorship and a partnership. Ideally, an LLC is essentially a simplified business model designed to protect business owners’ interests.

Ideally, LLCs are not bound by as many legal constraints as corporations, but this does not mean that they are not useful. Whether you are starting a one-person business or you want to have hundreds of employees on board, LLCs give you the much-needed flexibility for growth and expansion. It for this reason that LLC tends to be more favored than other business forms.

What Are the Benefits of an LLC?

One standout benefit of an LLC is that it protects its owners’ assets if the business faces legal issues. Suppose the company loses a lawsuit that has some financial implication and it is unable to meet. You only risk losing the capital that you invested into the business and not your finances.

Secondly, LLC gives you some level of flexibility when it comes to managing a business. LLC’s can be member-managed, which means that all day-to-day management activities are left to individual owners. On the other hand, individual members can opt to hire professionals to handle managerial tasks on their behalf.

If you are not a fan of paperwork, starting an LLC can be a good move. Unlike other business entities, LLCs are subject to few administrative procedures and less documentation than other business structures.

If you plan to follow the LLC route, there are some detailed steps to follow to get started. However, it is worth noting that the requirements might vary depending on the state where you will be registering your company.