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Should I form an LLC?

Starting a small business can be both an exciting and daunting venture. There are so many aspects of running your own business that you cannot anticipate ahead of time and have to figure out along the way. For this reason, many small business owners choose to start out as basic as possible with a sole proprietorship. Once the business gets its footing however, some business owners start to see the benefits of moving into a limited liability corporation or LLC.

The main reason that many small business owners are drawn to the idea becoming an LLC is that creating this type of business forms a separation between personal assets and business

assets. The benefit of this division is that your personal belongings and savings are safe from lawsuits and business losses. If you have an LLC and someone chooses to sue your business, they cannot touch your personal assets. In addition, if your business has partners, each partner has some protection from bad business decisions of his/her associates. Also beneficial is that making your business a LLC makes it a separate entity. The title also lends some credibility to your business, often making it easier to get loans and secure other business associations.

It is important to note that while LLCs offer a number of benefits to business owners, they do not take things as far as corporations. Unlike corporations, LLCs cannot have shareholders. LLCs are also subject to self-employment taxes; whereas salaries are the only things taxed in corporations. Furthermore, corporations have the ability to offer a variety of employee extras that LLCs do not have the capacity to do. Take this brief quiz to help determine if becoming an LLC is right for your business.

Are you concerned about possible business lawsuits or debt?
Is your business in the area of banking, trust or insurance?
Are you hoping to boost your business credibility by forming an LLC?
Do you wish to issue shares of stock?
Do you want the option to report profit and loss on your personal taxes?
Does your business have multiple partners to form an LLC?
Are you hoping to avoid state fees?
Are you willing to set up a separate bank account and credit card(s) for your business?