LLC Advantages and Disadvantages: Overview
Before forming a limited liability company, the business owner or prospective business owner should become familiar with the advantages and disadvantages of an 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.
- 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.
- 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.
LegalZoom makes it easy and affordable to form an LLC. Get started by answering a few questions about your new business. We will assemble your LLC documents and file them with the Secretary of State, and you will receive your completed LLC package by mail.