Do you have an amazing business idea that you are ready to get off the ground? Or, are you a professional who is ready to be your own boss? It may be time for you to form an LLC or PLLC. But, how do you know if one of these will work for you and your business? Read on to find out which of these business structures may be for you and how you can be in charge of your work and life while still protecting your hard-earned assets.
What is an LLC?
A limited liability company or LLC is a particular form of business structure in the United States. LLCs help make sure that even if things don’t work out for your business, your personal assets such as real estate or cars are protected.
LLCs combine elements of a sole proprietorship and a corporation. The formation of an LLC is often ideal for businesses that will have a single owner and can offer benefits to them not available if they formed a corporation. If you are looking to open up an online boutique or restaurant, an LLC may work best for you.
What is a PLLC?
A PLLC or Professional LLC is an incorporated structure organized by owners, also called members, to provide limited liability to them and lower their taxes. Unlike LLCs, PLLC members must be licensed professionals or other professional entities. Different states determine what a “professional” occupation is different so it’s important to see if your occupation counts as professional where you will be operating. If you are unsure if your occupation will count as a professional in your state, it is best to talk to an attorney. Occupations that are deemed professional could include occupations such as creative arts therapists, physicians, interior designers, and more.
When Is It Time To Get a PLLC Or an LLC?
If you are planning to start a business and begin accepting money, you will need to register your business for tax and legal purposes. You will need to determine the business structure that you will use so that all of the necessary forms are completed. Registering a business structure helps you lower your tax burden and protect your personal assets.
What Are the Benefits Of an LLC or PLLC?
The most discussed benefit of an LLC or PLLC is avoiding double—taxation. Double—taxation can cause you to have to pay taxes twice. Once from the corporate level and again on your personal taxes. Because the business’ finances will pass through one or multiple owners, the owners can report the information on their taxes as personal income.
Being filed as an LLC or PLLC will also help make sure you and your belongings are safe. In the event that the business hits hard times and becomes bankrupt, your personal assets are protected. Your home, car, and other belongings are safe from being repossessed because the business will be deemed bankrupt, not you. While starting a business can be risky, filing as a business entity such as an LLC or PLLC significantly decreases that risk.
Will an LLC Or PLLC Be Best?
Choosing whether to form an LLC or PLLC is not about which one is best overall, but rather, which is best for your business specifically. Understanding the type of operation you have and your business model will help you choose which you need and there are experts in law that can help you determine what will be best for your business now and in the future.
In summary, choosing what to register your business structure will be one of the most important decisions you will make as a business owner. Your structure will impact how your business functions every day and will have a personal impact on your taxes and protection. Choosing between an LLC or PLLC will be based on your organization’s needs, your profession, and your state of operation. This is not a choice to make lightly, and if you are unsure of what will work best, talking to an attorney about your choices can save you money and a headache!