Disadvantages of an LLC

Disadvantages of an LLC

The LLC does have some additional administrative requirements when compared to a sole proprietorship or limited partnership. They are typically related to  keeping liability protection in place for the LLC members.

Cost. Compared to a sole proprietorship or partnership, an LLC is a little more expensive to operate. The start-up cost is only slightly more than for a corporation, but proprietorships and general partnerships do not have start-up or annual fees.

Taxes. A limited liability company owner may have to pay unemployment compensation for him or herself, which he or she would not have to pay as a sole proprietor.

Banking. Checks made out to a limited liability company cannot be cashed; they must be deposited into a corporate account. Some banks have higher fees just for businesses that are incorporated.

Separate records. The owners of a limited liability company must be careful to keep their personal business separate from the business of the limited liability company. The limited liability company must have its own records and should have minutes of meetings. Money must be kept separate. Businesses should maintain seperate recrods and the structure of a company might make it easier to do so.