When you are ready to start a business, you must make many critical decisions. The choices you make early in your business formation efforts can impact the success of your endeavor on a long-term basis.
One of the earliest decisions you make involves choosing a structure — also called a business entity — for your enterprise. You have several business structures to choose from, such as a partnership, a corporation and a limited liability company, or LLC. In Denver and other Colorado communities, most people choose the LLC business structure.
Why do people prefer to form an LLC?
In a nutshell, entrepreneurs like the LLC structure because it offers significant advantages and few disadvantages. Arguably, the most advantageous reason to form an LLC is that it protects your personal finances and property from liability. Other advantages of opting to create an LLC include:
- It imposes fewer corporate rules than other business structures
- It offers significant tax benefits, including no double-taxation
- It gives you flexibility when customizing your company management structure
- An LLC is typically easier to form and maintain than other structures
As far as the disadvantages of a limited liability company, there are very few. One of the most notable involves the loss of your limited liability. However, this typically only occurs if you engage in fraud or fail to keep personal and business transactions separate.
Despite the many benefits an LLC can provide, it is still wise to weigh your options carefully before choosing a structure for your business. Another vital step Colorado entrepreneurs should take when forming a business is to become familiar with corporate laws that govern new startups and established businesses alike.