Why Do So Many Lawyers Recommend LLCs For Small Businesses?

Lawyers Recommend LLCs For Small Businesses

LLCs are one of the most robust legal entities available to small business owners, and a relatively new one.  Previously, a small business owner had the option of a sole proprietorship, a partnership, or a C-Corp.  The LLC was created to give small business owners some of the legal protections of a corporation, while acknowledging that their business model did not require the structure of a C-Corp. It is the legal protections, along with a few other points that make it the most widely-recommended incorporation model.

An LLC has more options when filing federal taxes.

What many don’t know is that because LLCs are state institutions, the IRS allows for owners to file as proprietorships, partnerships, or C-Corps.  This helps the LLC to maximize tax savings.

LLCs have enforceable operating agreements.

Because it is treated like a corporation, an operating agreement is required establishing who may do what in the interest of the LLC and those transactions available to the corporation.  It is enforceable by law and protects all members.

LLCs safeguard personal property and income.

Because an LLC is a legal entity, the individual or partners are not personally liable for any debts from vendors or legal settlements.  The same holds true if one member of the LLC has personal financial issues, the company and other partners will not be held accountable.  It establishes a barrier between personal and business assets.

In short this is definitely a model that many prefer to use because it is simple, cheap to start, and has built-in legal protections.  You will be hard-pressed to find an attorney who would not recommend this model for small business owners.