The pros and cons of limited liability corporations

On Behalf of | Jan 12, 2023 | Business Formation |

Limited liability companies are one of the most flexible and simple to set up. The right choice of business structure demands a close conference with a lawyer. However, below are some high-level points that can guide your choices.

What most like about LLCs

LLCs offer several appealing features to business owners. They are:

  • Simplicity: there is significantly less paperwork to open an LLC than a corporation.
  • Lower tax liabilities: California does tax LLCs, but it is an $800 tax. On the other hand, a corporation has an 8.84% tax rate.
  • Liability protections: Your personal property is protected against liability for negligence committed by employees or other owners. You may – in most cases – have debt collection protections.

No matter how attractive these benefits are, some drawbacks exist.

The Limits of a limited liability company

An LLC‘s protections are, by definition, “limited,” and it is best to consider those limitations when you decide. While in an LLC, you have protections against the acts and negligence of others, but if you were to act negligently, then your personal assets are in play in any litigation.

Additionally, personal property can be at risk under every business structure if the opposition can “pierce the corporate veil.” Piercing the corporate veil is possible in limited circumstances, but it is an immensely complex process, often invoked in matters such as wage and hour disputes.

Is an LLC right for you?

To fully understand the potential benefits and risks of your business structure choices, you must speak with an attorney who understands California business law. You can fully explain your needs and hopes and get a thorough review of what makes the most sense for you.

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