Q: How do I know if I should create an LLC for my company? What are the downsides?
A:
This question is very complex for a short answer. Some general considerations are: do you need protection of your personal assets from potential business debts or liabilities; are there investors who do not wish to participate in the day to day activities but wish to invest and share in profits or losses; losses or income will be attributed to owners on their personal taxes at the end of the year potentially; there are other tax advantages which should be discussed with your accountant/cpa.
Some of the downsides are: the initial expense of set up and continued expenses annually of fees due the state, which charges can be expensive; some states have franchise or capital values tax on LLC's; investors may want to invest in a corporation, making it harder to raise capital investments; unless you are a single owner LLC, ownership of the business is spread across it members; as a member of an LLC, you are not allowed to pay yourself wages.
The question of the form of business should be discussed personally with an experienced attorney so that the facts of your situation will control the type of business - LLC, S Corp, C Corp, Sole proprietor.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
