What Are The LLC Benefits For My Small Business is a question every new entrepreneur will need to ask in the course of starting and growing a small business. In Part 1 we looked at the benefits of asset protection and flexible taxation options. Click here for that information. In Part 2 we will consider the benefits of: increased credibility, an enhanced professional image and the flexible management/operational freedom an LLC offers.
The LLC Benefit Of An Enhanced Professional Image And More Public Credibility
Forming an LLC will benefit your small business by producing more credibility and by enhancing your professional image. An “LLC” ending on a business name communicates permanence and also indicates that the company is officially registered at the state level which exudes more trust and security than an non-incorporated business. If you are viewed as more trustworthy you will benefit from more customers and business. With all the scams out there if you show the public that your business has been legally organized you will stand out.
My accountant advises that you have a lower risk of a tax audit if you have an LLC designation vs a sole proprietorship. The IRS knows how easy it is for an individual to claim they started a small business and then start trying to take unlawful deductions to lower their taxes. With a sole proprietorship there is no state filing required-you can just call yourself a business. With your LLC you are filing with a state agency and are committed to maintain and operate a legal vehicle for your business. This one step goes a long way with the IRS in deciding where to focus their audits.
In most states, other businesses are not permitted to file your exact corporate or LLC name in the same state. From a branding standpoint this helps with your company’s reputation not being tarnished or confused with another company bearing a similar sounding name and strengthens your business in terms of brand identity and marketing efforts.
The LLC Benefit Of Operational/Management Flexibility
The LLC laws are based on contractual flexibility which allows members to establish any organizational structure agreed upon by the company owners including the rights to profits and voting rights. The LLC can be managed by owners (members) or by managers, unlike the corporations which have a board of directors who oversee the major decisions and officers who manage the daily operations. There are no owner or member restrictions with the standard LLC. The laws governing LLCs impose very few formalities so the owners are free to focus more on operating the business without worrying about formalities, paperwork headaches and maintenance. The biggest benefit is that you can tailor how your LLC can most effectively be run and establish who has the authority. Given the amount of management freedom an LLC has been granted it is easy to see how this entity can be used for simple or complex business structures and everything in between.
LLCs can and should make use of the articles of organization if a partnership or multiple memberships is being considered. Partnerships often fail but the benefit of the “articles of operation” can be used to proactively eliminate or minimize problems by establishing in advance the deciding and determining factors in any disputes or legal action that takes place. This can help or prevent legal action against the partners because the terms of the operation are clearly spelled out and in place before the conflict arises. If you have employees it does wonders for morale when you know your concerns will be heard.
This article has continued the focus on the major benefits an LLC offers for your small business. We have seen that the LLC gives your business more public credibility, enhances your professional image and brand and offers you the freedom to run your business in the least restrictive manner. What’s not to like!