Advantages and Disadvantages of an LLC

Advantages and Disadvantages of an LLC

Before forming a limited liability company, the business owner or prospective business owner should become familiar with the advantages and disadvantages of the limited liability company (LLC) and how they compare to those of other business entities.

  • Compared to sole proprietorships and partnerships. The LLC has the most advantages when compared to a sole proprietorship or partnership. However, not all businesses are at a stage when an LLC makes good business sense. Read more about the advantages and disadvantages here.
  • Compared to corporations. LLCs are similar to corporations in that they offer limited liability protection to its owners. LLCs also have fewer corporate formalities and greater tax flexibility. However, one of the disadvantages is that profits may be subject to self-employment taxes. Find out more of the advantages and disadvantages here.
  • Compared to limited partnerships. LLCs offer liability protection to all the members of the company, unlike a limited partnership, which only provides liability protection to limited partners. Find out the advantages and disadvantages here.

With all business types, it is possible to convert from one to another. Learn more about converting an existing business, including why converting might be better than forming a new business.