Interested in an LLC Formation?
Limited liability companies (LLCs) are one of the most misunderstood types of business structures. Many entrepreneurs and business owners assume they should use the LLC structure as the basis for their business operations. When choosing the best business entity for your company, however, it is essential to understand the true advantages and disadvantages of the LLC structure.
Chula Vista, California, Lawyers for LLC Formation
Unlike online business formation services or pre-paid legal forms, our lawyers provide an in-depth analysis of your business goals and assets in order to give customized advice and assistance with the process of business formation. Contact us today to schedule a consultation with one of our experienced lawyers.
Advantages and Disadvantages of LLC Formation
LLC formation is relatively straightforward and, once in operation, an LLC offers an extremely flexible form of ownership as well as limiting personal financial liability.
Shelter from unlimited personal liability from lawsuits and business losses is the primary advantage of the LLC. Formation of an LLC also provides flexibility in the form and structure of the business as depending on the design, the company business may be carried out by all of the owners or even an individual with no ownership rights.
As part of the formation process for an LLC, we will create an operating agreement for the business, which is much like a partnership agreement with certain buy-sell provisions incorporated into the contract. With other choices of business entity, the partnership and buy-sell agreements may have to be written and filed separately from the formation documents, which can result in additional fees.
Formation of an LLC is not limited to large-scale business ownership. For example, an LLC may be an appropriate choice for families with small real estate holdings. Even three or four rental properties may be held under the umbrella of an LLC, thus removing the owners from personal financial liability for legal claims made by tenants.
LLC formation will also allow owners to select a method of taxation, which depending on the company structure may be taxed as a partnership, corporation, or in the case of only one owner – a disregarded entity for tax purposes.
LLCs are subject to a minimal annual franchise tax levied by the state of California, which may increase from the minimum fee as a percentage tax based on the gross sales of the business. These fees may make the LLC a poor choice for a large business operation but, for many business owners, these fees are offset by the flexibility of the LLC structure.
Learn More — Make an Intelligent Choice
Choosing the best structure for new or existing business operations is a critical step in planning for the long-term success of your company. Contact us today to obtain smart and customized legal advice about LLC formation compared to other types of business entities.