A growing number of companies are opting organized as a limited liability company (SRL – limited liability company [LLC]). Several key advantages make the SRL is an attractive option for many companies. LLCs also have some disadvantages. The owner of a company should be organized to study this before because changing an LLC to a corporation or corporation is not easy.
Advantage No. 1: Tax benefits
LLCs offer a similar tax position of associations (LLCs with only member are taxed as a sole proprietorship). The tax position means that the income is taxable SRL at one level (staff level). Unless you choose to be treated as a corporation, the LLC itself does not pay taxes. By contrast, corporations pay taxes on the income of the company and its owners must for taxes on dividends and bonuses they get from it. This “double application of the tax,” as it is called, can be avoided in a SRL.
Advantage No. 2: Less paperwork
Associations have to hold meetings and record minutes at such meetings each year; LLCs do not. The amount of paperwork required to buy property, open bank accounts or make major changes within the company is also significantly reduced in a SRL.
Advantage No. 3: Protection from liability
LLCs offer their owners a degree of liability protection, as does the corporation. The owners of both companies are generally not personally liable for the debts and liabilities of the business. The title of legal protection offered by an LLC has been challenged in some states, so if liability protection is your main concern, you might want to seek advice on legal precedents in your state before opting for an LLC.
Disadvantage # 1: Investors
Many investors angel investors and venture firms are cautious about investing in the SRL because they are a relatively new business structure that is not well understood. Start-ups and others that wish to raise capital will benefit from keeping things as simple as possible for potential investors. If the goal of the company is finally sell shares at an initial public bidder, an LLC will not be a good choice.
Disadvantage # 2: Stock Option Plans
The SRL is not conductive to the stock option plans for employees, so business planning to offer such a plan should consider another organizational structure.
Disadvantage # 3: It is difficult to change
While it is relatively easy to change from a partnership to a corporation or vice versa (the association, documents or shareholders do not have to change), change of an LLC to a corporation or partnership requires the establishment of a new corporate entity, with all the paperwork involved.
Disadvantage No. 4: Is there SRL with only members?
Some states do not allow members SRL unique, so companies with a person (such as independent entrepreneurs) have to check the laws in your state.