When I grow up, I would like to have my own business! It is every man’s dream!
Having your own business and being the boss has become easy and a trend these days. People take risks because of the resources and influence of technology and social media.
With the excitement and great ideas to start a business, establishing the discipline for an organization to become successful is often missed. It is advisable to know the best business type in the state you are in for your company.
Limited Liability Company (LLC) would be the best choice for small-medium-sized or start-up businesses. It is reasonable due to the liability protection benefit, and it is inexpensive. Expert formation services like Zenbusiness offer affordable packages to file your LLC for you, saving you from the hassle of paperworks and from possible incorrect filing.
There are two types of LLC, a single-LLC and a multi-member LLC:
- A single-member LLC has one owner (member) and has control over the company, and is required to pay taxes like a sole proprietorship.
- A multiple-member LLC can have two or more owners (members) who have shared control over the company and pay taxes like a partnership.
Multi-member LLC is the best for your business!
Setting up a multi-member LLC over a partnership has its advantages. In a multi-member LLC, your business has the flexibility of a partnership with the limited liability of a corporation. Liability protection is one of the benefits between the members’ assets and the company. A creditor may only run after the business assets, and the personal assets become at risk only when you or your members signed a personal guarantee for the business debts. Owners in a partnership must pay the debts using their own money or assets when a legal case is filed against the company.
Benefits of being in Multi-member LLC
An organization built in the multi-member LLC format enjoy other benefits:
- No limit to the number of members
- Members can either be individuals, LLCs, Corporations, and non-U.S. citizens.
- The company does not pay corporate tax but may apply as “S corp.” or a “C corp.” taxpayer.
- As an LLC, they enjoy the 20% pass-through-deduction
While a multi-member LLCs enjoy these benefits, there are disadvantages over a partnership such as,
- Registering with your state
- More paperwork when filing business taxes
- Multi-member LLC are required to pay self-employment tax
- Owners must change their tax status to become employees.
- Members are held liable due to illegal actions of another member/s like misuse of company funds, committing fraud, or knowingly doing something reckless, illegal, or causing harm to another person.
Some of us are lucky to continue the legacy of our parents. Others would have to start from scratch and go through the pain of getting all the behind the scene tasks, the difficulty in getting the paperwork done, and the risk of failure. Having a business is indeed a big responsibility to carry. But with the right tools, skills, and good management, your business can lead to the pathway of success.