What are the Benefits of Being an LLC?
Do you dream of starting your own business? Maybe you are looking at revamping an existing family company or turning that second home into a second or third income. If so, you are probably already anticipating the many decisions you will be facing across the board. Perhaps it’s the decisions from legal and tax perspectives that seem the most daunting. We can go ahead and give you a heads-up as to what would likely be the very first decision you would face: How will I structure my business?
Whether this new venture will become your everyday job or simply be passive supplemental rental income, there are many legal structures available to small business owners. However, we recommend that you highly consider setting up a Limited Liability Company, or LLC. They allow for liability protection, reductions and simplification of taxes, and ease of record keeping. Establishing an LLC also has the advantage of flexibility in proprietorship as they can be structured as a single owner LLC or even a partnership.
Let’s look a little closer at some of these advantages:
Establishing an LLC limits your personal liability. You are still liable for business operations and debt, but personal assets like home, investment, or bank accounts are not part of collectables.
With an LLC, taxes are passed through the company; unlike with a C Corp where you are taxed twice, once as a business and then an individual. With an LLC, you are only taxed once on your income tax return through a K1. Under some circumstances, you may also be able to deduct 20% of your income with the pass-through deduction started under the Tax Cut and Jobs Act (TCJA) of 2017.
Ease and Cost of Setup
While an LLC can be more costly to set up than sole proprietorship or general partnership, there are still significantly fewer costs than other incorporations. With an LLC, you are not required to have shareholder meetings and extensive record keeping. Also, if you have a multi-member firm, you are allowed various distribution options that are not allowed in corporations which are based solely on shares held.
If you have any questions regarding the benefits of setting up an LLC or you have questions as to how we can help with business planning, feel free to reach out to us at Wiser Wealth Management. We work with CPAs and attorneys to form a holistic team that provides comprehensive wealth management services for business planning, retirement planning, and investment management.
Matthews Barnett, CFP®, ChFC®, CLU®
Financial Planning Specialist