An important task associated with business formation and planning in Minnesota involves choosing the proper legal structure for your startup. Options to choose from include sole proprietorship, partnership, nonprofit, corporation and limited liability company. As is the case with most business decisions, each of these options has unique advantages and disadvantages.
In the end, it is up to you to research your choices, compare each option with your business needs and make an informed decision. To give you a head start on your decision, this post offers several of the pros and cons associated with choosing a limited liability company (LLC). You can acquire more information as well as professional legal guidance by discussing these decisions with a business attorney.
- Limits liability: As its name implies, this option protects your personal assets from certain legal actions customers or vendors may wish to initiate.
- Increased flexibility: An LLC allows you to set up your management structure easily and in a way that corresponds with your business needs.
- Tax structure: With an LLC, you get to choose how your business will deal with taxation issues.
- Investor difficulties: When your business is brand new, you might not need investors. However, this could change in the future. Typically, LLCs do not attract attention from outside investors.
- Lack of formal structure: Since an LLC operates with fewer business requirements than other business models do, you may eventually face problems in your operations. You can get around this disadvantage by having an attorney help you develop a detailed operating agreement in advance.
- More taxes: In some cases, an LLC must pay additional taxes. Examples include a franchise fee or capital values tax.
Choosing a legal structure sounds complex, but thorough research combined with a bit of forward-thinking can reduce these complications. As always, advice from a lawyer familiar with business planning and formation can offer a lot of authoritative assistance.