Dare To Be Different: Limited Liability Company
The road to success is never easy. It is often filled with potholes, bumps and tacks that could blow up the tire anytime. The same can be said for business. There is no 100% guarantee that if you do this and that, you'd succeed. More often than not, it's trial and error.
Good decision-making is a key factor in the success of any business. Sometimes, it seems it solely depends upon these decisions we make. This involves what type of business to go into and of course, what kind of structure to use.
Sole proprietorship, partnership or corporation. The decision is yours. But before you do, you might want to take a look at this thing called limited liability company.
A limited liability company is a kind of business structure that offers limited liability to its members. It's not a partnership nor a corporation but rather a fusion of the characteristics of both.
Confused? Let us clarify it a bit.
In a corporation
* The company offers you just that limited liability depending on how much you invest. Just like in a limited liability company.
* There is no limit to the number of members. LLC members may be a single person, a corporation or a member of another limited liability company.
In a partnership
* The losses and liabilities of the company are shouldered equally by the partners. In LLC, there is a limit to how much a member will shoulder and collectors cannot hound the members to pay the company's liabilities using their personal assets.
However, the method of taxation in a partnership and a limited liability company is the same. On both types, the members put whatever income or loss they experience on their personal tax returns. This means that the company isn't the one paying the taxes but the individual members themselves. And there is no doubling of taxes involved.
The advantages of an LLC are:
* Less paperwork and administrative duties involved. This is because the company can be classified into different forms like sole-proprietorship, partnership or corporation regarding the way it is taxed. If they are registered as a sole proprietorship business, then tax involves less stress and work.
* General meetings and meeting minutes are not necessary
* There is more flexibility in the management of the business. All management policies depend upon the agreement between all of the members.
However, how good it might sound, there are always drawbacks. Disadvantages are:
* A limited liability company cannot last forever. Unlike a corporation where in succession takes care of the problem of management, the death of members or going bankrupt is usually enough reason for the company to break up.
* Also, the lack of stricter rules may cause a dissension between members and result to poor management.
* And it might be pretty difficult to find people willing to invest in the company. Note that a limited liability company is a relatively new trend and these investors might not be confident in investing in something that they don't fully understand yet, compared to the familiar grounds of a partnership or a corporation.
Yes, the road to success may be small, hard and long. Putting up your own limited liability company will take hard work and patience. But who knows? You might reap the best rewards. Be daring and be different.
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