With the continuing number of people losing their jobs, many have elected to become entrepreneurs to try and break out on their own after previously holding regular jobs. Whether you have just started your own venture or still planning to do so, you may want to hear about the benefits of becoming an LLC.

LLC, or Limited Liability Company, is a type of business organization which is becoming very popular because of the benefits that it provides the owners.

Although it may be easier to make your business an LLC, instead of a sole proprietorship, when you are establishing it, depending on how your business is set up it should be possible to convert it to an LLC.

If you launched your business as a sole proprietorship, you may have simply filed a DBA (doing business as) form in your area. It is possible that you may not have registered your business with the state. One of the forms you can use when registering your business is an LLC.

There are advantages and disadvantages when choosing to start your company as an LLC, but the most important advantage is that it provides protection from liabilities to the owners. In case an LLC venture fails for example, the owners would not be held accountable for loans made by the company. The owners cannot also be held legally responsible should the business be taken to court for whatever reason.

A key benefit is pass-through taxation for the owners which means that they are still able to file income or loss on their individual income tax returns. Other benefits would be increased credibility with shareholders, less stringent requirements compared to corporations, and a more flexible management style. There are also no business taxes, board meetings or board of directors, as ordinarily required from corporations.

The disadvantages of starting an LLC lie in the legalities and fees. In setting up an LLC, you have to file and pay the Articles of Organization in the state where you have registered your company. Some states require an annual report or franchise fee as well. Sole proprietorships and general partnerships are exempt from paying these fees however while small businesses are only charged a minimal amount. It is also difficult to transfer ownership in an LLC because there are no stocks to be sold and any major changes must be unconditionally approved by all the owners.

An LLC may be set up by a single owner in some states, but most states insist on at least two. Another disadvantage is a requirement for the payment of self-employment taxes, something you would have to do if an LLC becomes your only income anyway.

To save themselves the hassle, many people who wants to form an LLC resort to hiring lawyers for handling the legal requirements. Forms are also downloadable from the internet for those who are secure enough to comply with the process by themselves. If such is the case, just be sure to use the forms which are recognized by your state and research any possible special requirements if any.

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