Why You Shouldn’t Form an LLC

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Among the four primary legal structures available to aspiring startup founders and business owners, the limited liability structure is fairly popular. Its main benefits are limited personal liability for its members and a flexible tax structure. But forming an LLC is simply not the best choice for every company owner. In many instances, it is far preferable to form a sole proprietorship, a partnership or a corporation.

The reasons why aspiring business owners and startup founders ultimately end up choosing one business structure over another vary based on circumstance, business type, industry, ownership, management style, taxation, regulation, location and overall vision. As a result, it is generally a good idea to speak with an experienced business law attorney before committing to a specific structure for your new business. Especially because there may be numerous reasons why choosing the popular LLC option as a matter of course may not be the best decision you can make for your specific company.

 

Sole Proprietorships and Partnerships

When individuals or multiple parties operate businesses without formalizing their activities, the state will treat this conduct as the work of a single-member sole proprietorship or a multi-member partnership by default. When these arrangements are formalized and companies are granted greater protections and benefits under the law, they generally retain a management structure that is as flexible as it was by default. There are certain kinds of partnerships that become more structured when they become legally registered, but in general sole proprietorships and partnerships have the most flexible management and ownership structures available.

If you are interested in running a company yourself or with others and are primarily concerned with flexibility in your approach, one of these two structural options may ultimately serve your vision well. There is no personal liability shield associated with these structures, but there are other legal tools owners and partners may take in order to better ensure personal asset protection while maintaining a flexible business approach.

 

Corporations

If you are interested in issuing stock in your company, you must form as a corporation. The rigid management style associated with this business structure is not the best fit for every company. However, the ability to raise capital and offer enticing equity options to investors and talent are both opportunities reserved for corporations. If this approach is important to your vision, please consider speaking with an attorney about the benefits and drawbacks of forming a corporation.

 

Business Formation Assistance Is Available

If you are interested in forming a business, please turn to LawTrades for assistance. Our team has helped to launch more than 5,000 startups and has provided necessary support as these businesses commenced operations. From financing the launch of your business to meeting on-going compliance concerns, protecting your intellectual property to recruiting top talent for your team, LawTrades provides affordable, efficient and effective support and guidance. Whether you are looking to form a sole proprietorship, a partnership, a corporation or a limited liability company, our team of business formation lawyers would be happy to assist you with your new company’s legal needs.

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