Why Setting Up A Limited Liability Company Is Usually The Smart Move

🚀 Introduction

Let’s be real, starting a business is exciting and nerve-wracking. And, one of the first big decisions you'll face is what type of legal structure to choose. Choosing the wrong one can set you back financially, and might even stunt your future growth prospects. Enter the Limited Liability Company (LLC). If you're looking for a smart, flexible, and secure way to launch your business, forming an LLC is probably your best bet. Let’s discuss how!

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As you get into business or a career, one of the first questions you should ask is which structure to use. You want to ensure that you have the right setup to minimize taxes and make your business as profitable as possible. After all, you want all your hard work and effort to pay off. 

That’s why a lot of people set up a limited liability company of one kind or another. Usually, it’s the smart move. But what specifically about this business structure makes it so appealing compared to say, self-employment? 

Easy to Set Up

Perhaps the biggest reason so many people love setting up limited liability companies is that they are easy to set up. These days, there are agencies in most countries offering this structure that will do the process for you, without you having to do much, or anything, in the background. 

Once you have a limited company set up, you can then start thinking about your tax options. You won’t have to complete much paperwork, and the fees are generally quite low. 

Enhanced Credibility

Another reason why setting up a limited liability company makes sense is that it enhances your credibility. Simply having a limited company signals quality to your employees, which you don’t always get with other structures. 

Why this is the case is a mystery, since the structure isn’t particularly important. However, in the public eye, a limited company suggests quality and adds free legitimacy. 

Flexible Taxes

Another perk is that you have more flexible taxes that better reflect your true take-home pay. 
For example, if you are self-employed, you may be considered “within IR35” for tax purposes. What is IR35? Essentially, it is a piece of legislation that attempts to harmonize self-employed and employee taxes so both groups pay the same. However, if you are a director of a company, you benefit from all the perks of that position, including the ability to deduct expenses when you use them for your business.

You can also pick which sort of corporation is most beneficial for your setup, depending on where you want to be. Usually, you’ll find that one is better than the other, especially if you use a financial advisor. 

Personal Asset Shielding

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You also might want to set up a limited company if it offers you better personal asset shielding compared to a self-employed situation. Usually, you’re 100% responsible for debts as a self-employed individual, which is why it is so dangerous to grow a business under that arrangement. Debt could ultimately bankrupt you. 

However, with a limited liability company, you don’t face those kinds of risks. There’s often a strict separation between personal and business finances, and things like your property. Even if the company goes under, you won’t necessarily lose out. #

Easy Management

Finally, a lot of people choose limited companies because of easy management. You don’t always need a board of directors or shareholder meetings, especially if it is just you and some employees. This makes life even easier for most entrepreneurs. 

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Photo by Tima Miroshnichenko: https://www.pexels.com/photo/a-businessman-looking-at-the-documents-5439374/