Without more information to go on, I’ll just highlight the pros and cons associated with forming an LLC.
Let’s start with the advantages:
- More flexibility in management structure. But, be aware you still have to follow state requirements for filing the corporation, but you can tailor the business to your own style much easier than you can a corporation.
- Limited Liability. This is the main attraction for most people—if your business faces litigation your personal assets wont’ be up for grabs.
- More tax options. Who doesn’t appreciate a little more say in taxation? As an LLC you can pick if you are taxed as a sole proprietorship, partnership, S corporation, or corporation.
- Less involvement from investors. This can be an attractive feature if you really want to keep investors out of the day-to-day decision making of the business.
- The business takes on a life of its own. Even if you sell your business or die—the business can live on forever. Hey, some people think that’s pretty awesome!
- Less hassle. When it comes to an LLC you have less paperwork, fewer regulations, and you aren’t required to have annual meetings or put in place a board of directors.
The not-so-great disadvantages:
- Pass through taxes—Each owner has to represent their losses and profits on their individual tax returns. Sometimes shareholders see this as too much of a burden and LLCs may be better suited for individual owners.
- Hesitant investors—Because there are fewer restrictions, investors may see an LLC as a bigger risk and less likely to invest money in that type of set-up.
- Potentially more problems—Because there is less structure you may be more likely to run into some issues down the road.
So yeah, to answer you question it’s probably going to depend on the specifics of your situation. To get the best advice, check outto hook up with a startup attorney that can offer some situation-specific insight.
In the meantime, if you are interested in startup law in general, check out my free eBook. You may get some info about some other questions you may have. Good luck!