You don't need an LLC to start a business, but, for many businesses the benefits of an LLC far outweigh the cost and hassle of setting one up.
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by Jane Haskins, Esq.
Jane has written hundreds of articles aimed at educating the public about the legal system, especially the legal aspe...
Updated on: July 31, 2024 · 3 min read
An LLC, or limited liability company, provides personal liability protection and a formal business structure. You can also get those things by forming a corporation or other type of business entity. It's also perfectly legal to open a business without setting up any formal structure. You'll gain simplicity but miss out on some key protections.
Here's a look at the risks and benefits of starting a business without an LLC.
If you don't form an LLC, there are two types of legal options for running your business. The first is to file paperwork with your state to establish another type of business entity such as a corporation or limited liability partnership.
Each business entity type has its own benefits, but all of them have one key feature: They limit your liability for business debts.
Your other choice is to operate your business without creating a formal business entity at all. If you are the only owner, you'll be a sole proprietor. If you own your business with one or more other people, you will be a general partnership. Going this route has a few advantages:
Starting a business without an LLC does, however, carry significant risks, especially if you have business partners or employees.
If you don't form an LLC or other business entity, you leave your personal finances vulnerable to business problems, and your operations may suffer from the lack of formal structure.
Disadvantages of starting a business without an LLC include:
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