California business owners make many decisions in the process of starting up a business. One of the first things one must decide on is the type of business entity to form. Each type has its own benefits and drawbacks.
A Limited Liability Company is one of the most common forms of business entity. If you pick this option, you have many potential benefits waiting for you.
Entrepreneur looks into the advantages of an LLC, of which there are many. First, they point out that an LLC is often a better choice for smaller businesses. The operation of an LLC is not micromanaged as much as some other structures require. It allows for flexibility among management. The operators also do not have to keep strict paperwork. This is not true for other types, like corporations. If your business is small and values flexibility, an LLC is often your best option.
The biggest draw of an LLC is the fact that it offers increased personal protection. The owners and operators have limited liability with an LLC. This means they can separate their personal and business finances. In other words, except with respect to the capital investments in the company, what happens with the business does not affect their personal assets. A judgment against the business entity can not be enforced by levying on the personal assets of the owners. If the entity has to file bankruptcy for some reason, it only affects the assets held by the business, not the other assets of the owners. This allows you to proceed with less risk. The owners should not suffer personal and direct loss if their business endeavors fail.
Of course, an LLC is not right for every business. Businesses that require professional licenses often can not be LLCs. Start-ups that intend to “go public” someday should probably not start out as LLCs. You should make a choice after looking through every available option. Only after comparing them will you know which one suits your current needs and goals.