Why would you want to form an LLC? Many times the top reasons for forming an LLC in MN or anywhere else include things like making it easier to raise capital, anonymity, asset protection, employee benefits that are deductible, tax savings, credibility, lawsuit protection and many more.
Forming this type of business means that a separate legal entity has been created and this provides personal protection. Also, forming an LLC means that the company will have a range of powers that is much broader than that which are had by a sole proprietorship.
These powers can include perpetual duration, a separate liability for things like corporate debts, benefits when it comes to small claims court and more. What forming this type of business really means is that an entirely separate legal person or entity has been created.
While you might control the corporation, you are also a shareholder. When and if the corporation is ever sued, you personally are protected from the suit while the corporation is the defendant. Serve to reduce your Personal Liability When you form an LLC incorporation you essentially are creating a separate person from the person or persons who own it.
Therefore, in the event of a lawsuit, provisions in the laws will serve to protect the actual owners from any sort of personal liability. If you ever do business with any of the public or if you even have a single employee then you leave yourself open to liability legally.
Once it is formed, this liability falls to the business instead of you personally. Distinct Tax Advantages Once you form an LLC, you have a broader availability of tax deductions. A few examples of these benefits include things like entertainment, business trips, pension plans and even medical expenses being able to be deducted as business expenses.
Statistically speaking, the self-employed people who have to file Schedule C are the highest percentage of taxpayers who are audited. The rate of audits is one that is considerably lower than that for the self-employed. Protection of Assets Most of the time, if there is going to be a lawsuit then it will come from one of two source - personal or business.
If it is your business that is being sued, there are provisions set forth in the laws that can keep you protected from being personally sued. That being said, when you do happen to be sued personally, such as from an auto accident, then having formed an LLC can also provide you with protection. An LLC has shareholders and members.
While corporate law allows for the confiscation of your stock in a personal lawsuit, this means that your membership in is protected when you are sued personally. All in all, there are several reasons to form an LLC and they all have to do with keeping you protected.
Kathryn McDowell is a small business owner. She recommends considering for protection of your assets and tax benefits.