Deciding what business structure to use when building a company may not always be an easy choice. Business owners in Michigan will find that different structures have different benefits and disadvantages. Those who may have relatively small operations may like the benefits offered to limited liability companies.
Before getting started concerning the benefits of this business structure, it is first important to understand what a limited liability company (LLC) is. Limited liability companies are considered a hybrid of sorts, between a corporation and flexible partnership. There are no shareholders but members instead. This structure type can be chosen by single owners or partnerships, or it can be used for combined corporations or small businesses.
One of the biggest benefits of choosing the structure of an LLC is the tax advantages. Members of a limited liability company will report business losses and profits on their personal tax returns, rather than the business being taxed. This, though, can be a negative to some, as members of an LLC are considered self-employed and will be required to pay a self-employment tax — which can be significant. Another advantage of forming limited liability companies is that the personal assets of members are generally protected, should companies be sued or accrue debts.
As with any business structure, there are advantages and disadvantages, but company owners will have to weigh which structure will best suit their needs. Limited liability companies can be great for small businesses. If this structure is chosen, assistance is available to walk Michigan business owners through the processes of creating LLCs, and to ensure companies have all necessary legal protections in place.
Source: sba.gov, “Limited Liability Company“, Accessed on May 20, 2015