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Why is it beneficial to set up a limited liability company?

| Apr 10, 2020 | Business Formation |

If you ever take time to look at the incorporation structure of some of your favorite, local small businesses here in Baton Rouge, you’ll notice that many of them are set up as limited liability companies (LLCs). This isn’t a coincidence. Many owners here in Louisiana and elsewhere in the United States choose to incorporate as an LLC because they appreciate how it provides them with many of the same protections of a corporation while still allowing them to operate as a small business.

An LLC has a highly desirable tax structure compared to many other types of business formations. The Internal Revenue Service (IRS) allows an LLCs profits and losses to be passed-through on their personal income taxes similar to what someone who owns a sole proprietorship or partnership can do. This means that there’s no separate tax filing for an LLC.

Owners who set up LLCs limit their personal liability as well. Any debts that the business incurs, including lawsuit judgments, liens, and claims are limited to the business’ assets. This means that a lienholder is generally unable to pursue the personal assets held by the business owner. (These protections don’t extend to owners engaged in illicit activities or who are listed as defendants in some negligence cases, however.)

Anyone wishing to set up an LLC must:

  • Select a business name that’s not already in use
  • Include “LLC” in the company’s name
  • Must appoint a registered agent
  • Draft and file the Articles of Organization and Operating Agreement with the state
  • Pay any required fees.
  • File a Notice of Intent to create the LLC in the local newspaper.

Setting up the right LLC can be a bit complicated. There are different types of them and each one carries with it specific benefits and limitations. If the paperwork is not filled out correctly and properly submitted, then it will be rejected by the state. A business formation attorney who is familiar with Louisiana incorporation practices can help you learn more about how to best set up your LLC.