When you operate a business, it’s important for your company to have the proper structure in order to take full advantage of the benefits that business structure provides under the law. One such structure that has several notable advantages, especially for a small business, is the limited liability company (LLC). LLCs combine some of the best legal features of corporations, sole proprietorships and partnerships.
Some of the benefits of an LLC include the following:
Limited liability — The LLC structure separates and protects the owners’ personal assets and finances from business liabilities, including the company’s debts, liens and lawsuits just as a corporation would. That way debt collectors can only go after the company’s assets.
No double taxation — An LLC is not considered its own entity for tax purposes, and no income tax return is filed specifically for the business. The owners simply report the company’s profits or losses on their personal tax returns, like you would for a sole proprietorship or partnership, in a method called “pass-through taxation.”
Ease — LLCs are oftentimes easier and less costly to get started compared to corporations, and the maintenance is less difficult to handle moving forward.
Flexibility — LLCs allow for a variety of operational management styles.
Officiality — Adding “LLC” to the name of your small business not only gives it a better ring, but it may also make your company sound more impressive in people’s minds.
Forming an LLC provides legal protection for your personal assets, while allowing your business to continue without too much disruption to your management style, taxes and income distribution.
If you own a small business and are considering turning it into an LLC, it’s important you understand the legal steps involved and get some help from an experienced New Mexico business law attorney.