Do I Need an LLC?

Anyone starting a business is confronted with the question of “how” exactly to set up that business. What is a corporation and what’s the benefit? What about an LLC? Why do I need any sort of special business “entity” at all? Determining what type of business entity (LLC, LLP, corporation, etc.) is a multi-faceted determination that is best made in consultation with an attorney. However, understanding the basic value and characteristics of these types of entities is important at any stage of business. Here, we will focus on the “limited liability company” or “LLC.” By creating an LLC, the owner(s) of a business creates a separate legal entity to own/operate the business. The owner(s) would then own membership interests in the LLC (similar to share of stock in a corporation). The three primary benefits of utilizing an LLC are (i) protection from personal liability from creditors (ii) avoidance of double-taxation present with some types of corporations and (iii) a significant amount of flexibility in how the company is set up, coupled with minimal ongoing administrative requirements. For many businesses, an LLC offers the most benefit and is the best fit. However, each situation, business and owner is different, so decisions relating to business creation and structure will vary for each business and owner.