One of the first steps you will take when starting up a business in Oregon is to determine how you will structure your company. Among the other formation options, you may consider establishing a limited liability company, or LLC. An LLC is a flexible formation type that lets you take benefit from aspects of partnership and corporation business structures. To decide if an LLC is right for your situation, needs and goals, it may be helpful to examine the advantages of this form of corporate organization.
According to the U.S. Small Business Administration, establishing an LLC largely protects you, as the owner, from your company’s liabilities. Therefore, your personal assets are not generally at risk if your business faces a lawsuit or is forced to declare bankruptcy. This makes it a good option if your venture is medium- or higher-risk or you have significant personal assets and wealth you want to protect. Under sole proprietorships or partnerships, your assets, including your savings accounts, home and vehicles, could be on the line if your business lacks the assets to satisfy any debts.
LLCs also provide tax benefits. With an LLC, your company’s profits and losses are passed through to your personal income. This means that rather than pay corporate taxes, the company’s tax obligations are carried out through your personal income taxes. By establishing an LLC, you avoid the double-taxation that occurs with corporation structure types. It is important to keep in mind that as a member, or owner, of an LLC, you are considered self-employed. Therefore, you are required to pay self-employment Medicare and Social Security tax contributions.
This post’s information is meant for general purposes only and is not intended to be taken as legal advice.