There are various forms to incorporate your business, from a sole proprietorship to partnerships and corporations, and one of the most popular forms is the Limited Liability Company, also known as an LLC. While this form of organization is often chosen to protect one’s assets and separate them from the business, LLCs can offer so much more. Let’s look at 5 reasons why converting your business to an LLC is the best and most future-proof decision you can make.
Reason #1 – Optimizing taxes
Taxation is one of the main reasons that many small businesses choose a limited company rather than sole entrepreneurship or other company forms. If the owners want to take all or most of the profits out of their business, an LLC is a good choice. LLCs can be considered pass-through entities, meaning that the business itself is not taxed. The tax returns filed by the business owners include only the profits at the end of the year and any salary payments made to the owners during the year.
Reason #2 – Raising capital
An LLC is rapidly becoming the preferred way to raise seed capital – investments under $500,000 – in early-stage businesses. Smaller investors generally prefer limited liability companies because they’re more familiar with them, the administrative requirements are simple, the time periods are short, and the costs are low.
Reason #3 – Highly customizable incorporation contract and organization form
The flexibility of the LLC makes it a good choice for small businesses. Regardless of how many investors or silent owners your business has, you can set your own rules for operation. This makes the formation process more flexible, and with professional assistance, you can create an organization that is 100% customized to your unique business situation.
Reason #4 – Shows commitment and credibility
When you form an LLC or convert your sole proprietorship to an LLC, you are showing your customers, partners, and employees that you have made a choice about your business. Sole proprietorships are less successful than LLCs in their credibility because the owners do not have to prove that they paid the fees to form an LLC.
Having an LLC increases your chances of obtaining a business loan. Not only does an LLC offer ownership interests in the business in exchange for money, but it is also treated similarly to a corporation and can provide leverage not available to sole proprietors.
Reason #5 – Limit your personal liability
Naturally, one of the main benefits of starting an LLC is that its liability is limited. The LLC structure separates your personal life from your business life and that of your other members. LLC members are only liable for their investment in the company, therefore a financial downturn cannot lead to banks or legal entities taking control of the owners’ personal assets.
How to turn your business into an LLC?
The team at IOOGO is ready to take your business to the next level by helping you form an LLC or convert your existing structure into a limited liability company. Our LLC package includes consultation and administrative work, all within 3 business days.