People who are starting a new business in Georgia should understand the pros and cons of an LLC before deciding it is right for their company.
In recent years, the limited liability company structure has grown in popularity. Many new businesses in Georgia have been created using this operating model. But, is this entity form always the best choice for new companies? In some situations, it likely is the best choice. But in other situations, different models may make more sense. Understanding some facts about limited liability companies is important for entrepreneurs before making a final decision about how to structure a new business.
A blended approach
In general, many people may well choose an LLC structure because of its approach that blends qualities of partnerships and corporations. The Georgia government explains that an LLC provides the personal liability protection of a C corporation with some tax advantages of other structures. An LLC may also be easier to establish than a C corporation.
Taxation and operation not the same
According to Forbes, one mistake that some people make is considering the taxation of a business and the operation of a business to be one in the same. In some cases, where an LLC provides a benefit to a company from a tax perspective, it may offer a less desirable reality from an operational model. Business owners are encouraged to consider how they want to run their businesses before they focus on how they want to be taxed.
The choice in how to operate a business should be based in part on what options for ownership or membership are desired. C corporations offer the most flexibility in terms of types of stocks that can be offered and who can own them. While this flexibility may not be needed, it can help guide business owners in their operational model choices.
All taxes are not created equal
Even within the world of taxation, there are different types of taxes to consider. How payroll taxes and income taxes are handled, for example, will have a different impact on an LLC or a corporation and should be evaluated separately.
Different types of LLCs available
There may be more than one variation of an LLC available to business owners. A single member LLC, for example, is like a sole proprietorship version of an LLC. There are also other types of LLCs that can be structured differently.
Getting proper guidance matters
Choosing a business structure is not always easy and the ultimate decision will impact a company in many ways. The Georgia Secretary of State reports that in addition to initial requirements, LLCs will need to register with the state every year and work with the Georgia Department of Revenue on state tax issues.
Because of the many issues to understand, owners are encouraged to work with an attorney when establishing their new companies. This assistance can help ensure that owners fully know what they must do not just to create a business but to comply with all ongoing requirements.