When starting a new business in Virginia, one of the first decisions you must make is how to structure your fledgling company. Depending on your circumstances, you may consider setting up a limited liability company or other formation types. In order to determine if an LLC is right for your company, however, it is important for you to consider the benefits of forming as an LLC.
LLCs may require less paperwork to establish than other formation types and structuring as an LLC may allow you greater ownership and management flexibility. When you set up an LLC, there is no limit on the number of owners, or members. Further, unlike with corporations, there are no fixed management requirements, which allows you and the other LLC members to decide how to operate on the day-to-day for yourselves.
According to the U.S. Small Business Administration, under other formation types, the owners carry liability for the companies’ financial obligations. Establishing an LLC safeguards members from such personal liability, though. Thus, your personal assets and those of your fellow members, including your home, vehicles and financial account balances, may not necessarily be on the line if your company is sued or must file bankruptcy.
LLCs do not pay corporate taxes. Rather, the profits and losses of your company are recorded on your personal tax returns and those of the other LLC members. You should keep in mind, however, that as a member of an LLC, you are considered self-employed for tax purposes. Therefore, you are responsible for making self-employment Medicare and Social Security tax contributions.
This post contains information that is not intended as legal advice; it should only be taken as general information.