LLC is extremely popular in small businesses. This is so because it provides a liability protection. Tax advantages are also a reason why one opts of LLC. But LLC has its own pros and cons. We’ve brought details about the advantages and disadvantages of LLC for new business holders to choose wisely.
Limited liability is the biggest reason why small businesses opt for an LLC. It acts as a protection net for the owners to be held accountable on the acts of the partners. Keep this in mind before you select the best LLC formation service.
Creditors in LLC can not go on to pursue personal property of the LLC owner in lieu of the business debt. In case of general partners and sole proprietors this can be the case. The limited liability can be lost. This happens with corporations as well. It is known as piercing the veil.
The membership in an LLC is flexible. It can be either partnerships or individuals. Trusts and corporations can also be a part. Interestingly, there isn’t any limit to adding the number of members.
The management of LLC has flexible roles. It can manage and also hire or elect management groups for the same. Corporations aren’t managed by shareholders. They are run by a board of directors.
Forming and maintaining an LLC is costlier than general partnership or sole proprietorship. Some of the states even charge a formation fee. This is called the initial formation fee. Furthermore there are some other fees attached to it which one has to pay on a timely basis to the state.
A major disadvantage with LLC is the difficulties in transferring ownership. In an LLC all members need to agree before adding a new member. Or even for altering the percentage of ownership of any member all the members must agree.
