Now that your small business is growing, it’s important to protect both your company and your own assets. Forming an LLC can help do that — but is it the best business entity choice for you? We’ve written a complete guide to forming an LLC to help with your decision. The LLC structure has many benefits that make it perfect for a wide variety of companies. However, there are also some disadvantages to creating an LLC. Here are some of the biggest pros and cons to keep in mind.
What Does “LLC” Stand For? The abbreviation “LLC” stands for limited liability company. The name refers to one of the primary benefits of this business entity type—LLCs allow business owners to keep their personal assets separate from those of the company. This effectively limits their own liability when it comes to company debts and responsibilities.
In the United States, a limited liability company is a business entity type that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation, creating the best of both worlds for business owners. LLCs have rapidly become one of the most popular business structures for new and small businesses, largely because they are considered to be simpler and more flexible than a corporation.
When you form an LLC, your business becomes its own legal entity, with separate debts and legal matters. However, LLCs are still tied to your personal taxes.