If you have considered incorporating your Missouri business as an LLC (limited liability corporation), but worry about the cost or the time commitment, this information may surprise you.
Why consider an LLC at all? This structure offers benefits that outweigh those typically available through partner arrangements or sole proprietorships.
Six LLC Advantages
1. Asset protection. If your business acquires debts and liabilities, the LLC can protect your personal assets such as your home and your personal bank accounts from creditors’ clutches. A creditor can therefore pursue your business assets, but cannot touch your personal assets. Comparatively, with a general partnership or sole proprietorship, your personal assets remain vulnerable.
2. “Pass-through” taxes. Corporations are taxed directly on all business profits. However, LLC income or loss “passes through” to the owner’s personal tax returns.
3. Stronger credibility. For a new business, the commitment of establishing an LLC may increase trustworthiness among prospects, customers, partners, employees and vendors.
4. Reduced compliance. LLCs must meet fewer state-imposed annual requirements and long-term formalities as compared to S or C corporations.
5. Flexible organization. LLC owners may create any organizational structure they deem acceptable. As compared to corporations, where officers and a board of directors oversee operations, owners or managers they designate can manage the LLC.
6. Few ownership restrictions. Unlike an S corporation, LLCs face few restrictions as to who may own an LLC, or how many owners the LLC may have.
Three LLC Disadvantages
1. Formation and cost. Forming an LLC requires Articles of Organization to be filed with the state, which in turn requires the payment of any applicable filing fees. Some states impose other fees, such as franchise tax fees or annual report fees. While these fees are small, they are costs that do not exist for sole proprietor or general partner structures. Additionally, you may require the assistance of a qualified attorney to ensure all paperwork is properly completed and filed.
2. Transferable ownership. With a corporate structure, the sale of stock can increase or change ownership. With an LLC, ownership is more difficult to transfer. Owners must approve new owners or alter the ownership percentages held by existing owners.
3. Less case law. The LLC is a newer business structure type, compared to forming a corporation. Therefore, less case law exists for LLCs.
Have questions about forming an LLC in Missouri? Speak with an attorney who is also a seasoned business professional – call the trusted legal advisors at Quinn Estate & Elder Law in West County.