5 Benefits of setting up an LLC?

5 Benefits of setting up an LLC?


As more and more small businesses are on the increase, it would make sense that businesses would investigate the various business structures as well as the benefits of the respective business structures. So what are the benefits of setting up an LLC?

1.Personal Asset Protection

With the formation of an LLC, businesses have the benefit of protection of personal asset protection. However, there should be no record or indication of any fraud or criminal behaviour, in such instances, the owners of the LLC will not be held personally liable for any debts or lawsuits incurred by the LLC. Then there is also the added security of investing in General Liability Insurance, also referred to as Commercial General Liability Insurance (CGL) or just Liability Insurance. This insurance is regarded as the most cost-effective and efficient way of protecting small business from unexpected costs, including and not limited to, lawsuits, unfortunate accidents or other actions taken towards the business. These unexpected costs could result in thousands of dollars. With the aid of this cover businesses are given peace of mind for the following:  

  •         In the event of sustaining a bodily injury.
  •         In the event of property damage.
  •         Any medical payments/expenses incurred.
  •         Legal defenses and judgments.
  •         As a result of advertising liabilities injuries.

Businesses that offer professional services, including but not limited to, accounting, legal advice, web design, etc., should consider investing in Professional Liability Insurance. This is also referred to as Errors and Omissions coverage (E&O). The services are offered to both small and large businesses and protect these businesses against any claims relating to inaccuracy, negligence or undelivered work.

Businesses need to remain mindful that having insurance does not necessarily mean that they will be covered for all risks that the business might face down the line, therefore knowing the options and cover can be beneficial. Some of the insurances that businesses should familiarize with are: There are various options, including:

  •         Worker compensation.
  •         Commercial Property Insurance.
  •       Commercial Auto Insurance

2.Pass-Through Taxation

Businesses that utilize the LLC formation have the benefit where the benefits go directly to the owners. The owners will then need to report their share of the profits on their tax returns, which is why LLC’s profits are only taxed once, hence the term “pass-through taxation”. When compared to C Corporations, which are subjected to double taxation. Usually, the profits of the business are taxed before being distributed to the owners, and then it is taxed again when the owners report their share of profits when submitting their tax returns.


When referencing to simplicity, the process of forming and maintaining an LLC is referred to. It is rather easy to form and maintain an LLC as there is quite a little paperwork involved. When compared to C-Corporations and S-Corporations, LLC does not require for there to be assigned formal officer roles, there is no need to hold annual meetings and there is also no need to record company minutes and resolutions. The process of forming an LLC is rather easy, and can be broken down into a six-step process: 

  1. Select your state:
  2. Name you LLC:
  3. Choose a registered agent:
  4. File the articles of organization:
  5. Create an operating agreement: 


With the formation of an LLC there are only a few restrictions that one needs to take into account regarding the ownership and management of the LLC:

  •       There is the option of choosing for the LLC to be either a single-member or a multi-member.
  •         When LLCs are managed by the multi-members, this is referred to as member-managed.
  •         There is also the option of electing a manager, who will be responsible for managing the multi-manager, which is known as a manager-managed LLC.

Another benefit is that LLCs have the option to be taxed as either a C-Corporation or an S-Corporation.

5. Increased Credibility

Forming an LLC brings added credibility. The fact that an LLC is recognized as a more formal business structure when compared to sole proprietorship or partnership. Having LLC incorporated in your business name gives customers added affirmation that they are dealing with a credible business. With the formation of an LLC, businesses can then start building their credit history. Providing the option for businesses to start accessing loans as well as lines of credit.

Yes, LLC’s are easier to form and maintain and are not subject to double taxation. Ready to take the next step, click here.