As we have discussed previously on this blog, there are a number of business structures that can be utilized to fit an entrepreneur's needs. Sole Proprietorships are easy to create and have little to no government oversight, but they can leave owners open to personal liability. Corporations, on the other hand, are highly regulated but protect business owners from liability. When creating a business, one must also consider how much power he or she wants to retain over business decisions, as Sole Proprietors fully control every aspect of their business, but power is divided in a Corporation.
This week, we want to briefly look at the Limited Liability Company, often referred to as a LLC. This business structure is like a combination of a Sole Proprietorship and Corporation. Under a LLC, business owners are protected from personal liability that may otherwise arise from a lawsuit against the business or business debts. The LLC can be created much more easily than a Corporation. A LLC business structure may also have tax benefits as profits and losses are passed on to the business's owners.
There are disadvantages to a LLC, though. One of the biggest disadvantages is that the company must dissolve upon the death of one of its creators. The same holds true if one of the founders files for bankruptcy. This means that, unlike a Corporation, a LLC cannot last forever. This can also restrict financing options, such as by selling stock in the business.
For many Louisianans, though, LLCs are suitable. We just urge all entrepreneurs to use caution when considering business formation, as this seemingly basic decision can have tremendous ramifications for years or even decades to come. Therefore, these individuals should think about discussing such matters with a legal professional who can help ensure that fully informed decisions are made.