Should Your Small Business Be An LLC?

Have you been considering forming an LLC, but are still not sure if it’s the best decision for your small business? Here are some of the basics of the LLC setup so you can understand the pros and cons of becoming an LLC.

What Is An LLC?

The acronym LLC stands for limited liability company. According to the IRS, LLCs are popular among small business owners because they limit the owner’s personal liability for debts incurred by the company; the business can function more like a partnership; and LLCs allow for a little more latitude in the management of the business.

What You Should Know about Forming an LLC

As with any business structure decision, there are pros and cons to consider. Here are a few of key issues you might want to keep in mind:

  • LLC business owners are able to get what’s called “passthrough taxation.” This is in contrast to the double taxation of corporations.
  • Establishing your business as an LLC is relatively inexpensive, especially when considering the cost of filing as a corporation.
  • As a member of your LLC you will be able to contribute capital or loan money to the LLC and then get a repayment of the loan with interest.
  • According to David Meier at, if you’re a member of an LLC, you are not allowed to pay yourself wages, and the managing member’s share of the profit is subject to self-employment taxes.

How to Organize Your Business as an LLC

If you decide to organize as an LLC, there are several steps in the process. First, LLC filings are handled at the state level, so you will need to get in touch with the department of government in your state that handles LLC forms and applications.

You will, of course, need to come up with an organizational name for your LLC, and determine whether or not you will be hiring an attorney to help you with the process. It is possible to file on your own, and the cost savings of going this route is appealing to many business owners. However, if you have any doubts or questions about the process, you really should consult a legal professional for advice. There are some discount filing services out there if your budget is tight, and licensed business attorneys can help as well.

Final steps include establishing the members and organizational structure of your LLC, and then filing for your LLC’s Federal Employer Identification Number (also called an EIN). You’ll need your EIN for tax filings and to open business bank accounts for your LLC.

It’s impossible to cover every step and every consideration in a single blog post, but hopefully this information will get you started. For further research, you might also want to read these articles:

Did you file your business as an LLC? What were the key factors in your decision?

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Emily Suess
Emily Suess is a full-time technical marketing writer in the software industry and a part-time freelance copywriter. To learn more about marketing your small business online, check out her copywriting blog, Say It With Me.


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  1. Dina Eisenberg |Speak Up Powerfully

    Just the right info at the right time. Rethinking the LLC thing. Thanks, Emily

  2. Pingback: Bonfire Buzz: Start-up Advice from the Bonfire | Small Business Bonfire

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