W hen establishing a  business you’re likely to come across choosing a business structure. While you have many choices, a limited liability company (LLC) is often the best option.

Incorporating an LLC gives you benefits like asset protection and company flexibility. If you’re wondering exactly how they can help, we’ve got you covered in this article. We’ll cover what an LLC is, its benefits, and how you can incorporate an LLC.

Let’s get started with exactly what an LLC is!

What are Limited Liability Companies?

According to  Investopedia , an LLC is a type of U.S business structure. The main benefit to LLCs is that they are separate entities to the owner.

This means that the owner isn't responsible for any of the companies debts or liabilities (to an extent).

Limited liability companies are referred to as hybrid entities because they merge characteristics of a corporation and a partnership/sole proprietorship.

From the corporation side, LLC owners benefit from 'limited liability'. Similar to a partnership or sole proprietor structure, LLCs benefit from “pass-through” taxation (taxed at owners income bracket).

This combination of flexibility and limited liability is what makes an LLC such a great option.

Benefits of Incorporating as an LLC

While you have limited liability like a corporation, LLCs are not bound by rigid rules. By incorporating as an LLC you can avoid certain mandatory meetings as well as extensive record-keeping.

Here are some of the best benefits of incorporating as an LLC.

Personal Asset Protection

Like a corporate structure, you aren't liable for your business’ financial obligations. Some examples of these obligations come from lawsuits and debts from creditors.

LLCs can keep personal assets like a bank account, real estate , and   even cryptocurrency  safe.

But, there are a few situations where you aren’t protected. These include making   personal contracts or  guarantees , negligence or wrongful acts.

Pass-Through Taxation

This is where a business’ profits or losses pass through to the owner’s personal tax bracket. An LLC is considered a pass-through entity and therefore you can qualify for tax deductions.

If you want to learn more about the 20% tax deduction, the IRS has a news article about the Tax Cuts and Jobs Act . The act saw approval in 2018 and looks to be in effect until 2025, so you still have time to capitalize on it.

Simplicity and Flexibility

Incorporating as a limited liability company is much simpler than choosing a corporation. Your business will avoid having directors, shareholder meetings and have easier administrative duties.

Limited liability companies also have flexible ownership rules. In an LLC you don’t have set limits on the number of members (owners) you can have. Whether you have one or one hundred, it’s your choice on how you want to run your business.

When it comes to the management of your company, you have the freedom to be self-managed. You can also hire an external manager or have a combination of the two.

Again, it’s up to you on how many managers your business needs to run smoothly.

Credibility

Credibility is an important part of running a successful business. By incorporating as an LLC, customers will be able to find you on registered lists. This can give them the peace of mind that you are who you say you are.

Ways you can Incorporate

There are three main ways to incorporate your new LLC. You can hire a  professional, incorporate yourself, or use an online incorporation service . Here’s a quick breakdown of the advantages and disadvantages of each.

Hiring a professional

Advantages:

  • You receive personalized service, this can be key for complex situations
  • You’ll be able to ask them any questions throughout the process

Disadvantages:

  • This is the most expensive option
  • Their availability might not be optimal for your situation

 Incorporation by yourself

Advantages:

  • Doing the work yourself is the cheapest upfront option out of the three
  • You can gain a deeper understanding of your business structure

Disadvantages:

  • A lack of knowledge about the incorporation process may lead to problems in the future
  • The time it takes to learn about incorporation would be better spent on your business

 Using an online incorporation service

Advantages:

  • Using an   online incorporation service can negate future costs from filing mistakes
  • The service is cheaper than hiring a professional but still provides equal quality

Disadvantages:

  • If you have a complex situation you might not get the best service
  • You must know exactly what structure you would like because most of the process is automated

Anyone starting a business, or currently running a company should consider forming an LLC. Especially those that want to limit personal liability.
If you want to incorporate an LLC make sure you do your research and hire the correct professional help, if you feel you need it.

Establishing a business is a large step, make sure you choose the right structure for your company.