When launching a new business in North Carolina, one of the biggest decisions you’ll have to make is how to structure your new enterprise. While people in Johnston County and Sampson County may have a basic understanding of what a corporation is and what a partnership is, what they may not know is that there is a business structure that provides the advantages of both corporations and partnerships: the limited liability company (LLC)
What are the advantages of an LLC?
One advantage of an LLC is that, like a corporation, the members of the LLC are protected from being personally liable for the actions of the LLC. So, if the LLC goes bankrupt or is sued, the members’ personal assets will not be affected. In contrast, members of partnerships do face personal liability for business debts.
In addition, the profits and losses of an LLC will not be subjected to corporate taxes. Instead, the members are deemed to be self-employed, and thus pay self-employment taxes, which are generally lower than corporate taxes. Not being taxed as a business entity also provides the LLC with greater flexibility in how to compensate the owners of the LLC.
LLCs also enjoy a certain amount of flexibility as to who can be a member. An LLC could have one member, or several members. Membership in an LLC can even be extended to corporations or other LLCs. In addition, LLCs do not have to submit the same amount of record-keeping as corporations, and start-up costs are often lower than those of a corporation.
It is important to keep in mind that in many states, if a member joins or bows out of the LLC, sometimes the LLC must go through a dissolution so it can then be re-formed in a way that includes the new member or excludes the old member. However, this can be avoided if there is an agreement within the LLC that addresses the transfer of ownership of the LLC.
Consider an LLC for a high-risk business venture
If you have a medium or high-risk business, it may be a worthwhile to consider structuring it as an LLC, to protect your personal assets and avoid having to pay corporate taxes. If you think that an LLC is a business structure worth learning more about, you can contact our law firm for more information.
