Jan 27, 2021
Reasons to Run Your Business as a Limited Liability Company
A business owner has the choice of running their businesses as a sole proprietorship, partnership, or a limited liability company (LLC). Each of these structures has its own merits and demerits, and it is critical the entrepreneur chooses the one that best suits their venture. However, LLCs have more advantages than the other business types, and it would be best to consider running your enterprise as a limited liability company.
Since forming and registering an LLC is complicated and time-consuming, you can work with LLC formation services. You can check out the zen business review to learn about the ZenBusiness LLC formation services and the alternative providers.
Below are some reasons why it is necessary to operate your business as an LLC:
Unlimited Life
Many businesses have a limited lifespan. For example, in a sole proprietorship, the business ends when the owner dies. LLCs, on the other hand, have continuous life beyond the owners. They can last for many years after the founders pass on.
Although one has to get approval from other members if they want to sell shares in a limited liability company, it ensures continuity. With corporations, shareholders can freely buy or sell shares without consultations.
Access to Credit Facilities
For a third party to invest in a business, there has to be a legally constituted entity. Capital owners and investors prefer working with corporate bodies since their stocks are of different classes. Business owners in sole proprietorship and partnerships have to sign contracts under their name. Therefore, they rely on their assets and credit to get a loan. However, an LLC business starts with its separate credit profile.
Asset Protection
One of the main reasons for incorporating a business is to protect the assets of owners. It leads to a separate legal entity meaning that the company can acquire assets and debts different from those of the shareholders. Furthermore, it helps in reducing liability. For instance, if creditors sue a business, the risk of losing personal assets or your house is reduced, unlike in sole proprietorship. The extent to which the creditors can go is limited to your ownership interest.
Easy Transfer of Shares
It is advisable to have ownership interest that can be sold readily, given to a friend, or transferred. Divesting from ownership in partnership and proprietorship is costly and cumbersome. With corporations, all privileges and rights are attached to shares held and are easily transferrable.
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