Today we will talk about: 1) Why should we register a limited liability company? 2) What are the biggest benefits of registering a company?
Many self-employed small businessmen can operate independently as self-employed or limited liability companies. When the business scale is relatively small, the difference is not big, and it can even be said that the self-employment form is simpler and more convenient. But if you want to grow your business to a certain scale, and the profits generated by your small business exceed your annual personal consumption, or your business income is unstable, then the advantages of registering a limited company will emerge. In addition to being more noteworthy from a tax saving perspective, a corporation or LLC can protect a small business owner's personal assets in the event of a debt or legal judgment being filed against the individual.
In general, the advantages of limited liability companies mainly include five aspects:
1. Personal asset protection
Both corporations and LLCs allow owners to separate and protect their personal assets. In a properly structured and well-managed corporation or LLC, the owners have limited liability for business debts and obligations. Generally speaking, a corporation must have more corporate formalities than an LLC in order to obtain personal asset protection.
2. Other Reputation and Name Protection
Add "Company". “INC/CORP/LTD” after your company name adds instant legitimacy and authority. Consumers, suppliers and partners generally prefer to do business with registered companies. In most states, other businesses may not form an entity or use the same trade name as your business name. This benefits the business legally and helps with brand building and marketing.
3. Long-term ownership
Add "Company". “INC/CORP/LTD” after your company name adds instant legitimacy and authority. Consumers, suppliers and partners generally prefer to do business with registered companies. In most states, other businesses may not form an entity or use the same trade name as your business name. This benefits the business legally and helps with brand building and marketing.
4. Tax flexibility
A limited liability company can have the benefit of delaying or even reducing income tax by balancing personal and corporate income. When an entrepreneur forms a company, he or she pays taxes on both the personal and corporate levels. However, companies can avoid double taxation on corporate profits and dividends by choosing among more flexible tax regimes.
5. Deductible expenses
Both corporations and LLCs can deduct normal business expenses, including salaries, before distributing income to owners.
Should I set up a company or just be a self-employed business?
We often hear this question among the customers we receive on a daily basis. Usually our answer is as follows:
Question 1: Is the main business of your business risky?
If it is: such as opening a restaurant, medical, personal health or nursing industry, I would usually recommend registering a company; in case the business goes wrong, you do not have to worry about losing your house, car or personal savings or property due to business liability.
Question 2: Is your company large?
If it is a brand-new company engaged in a brand-new project and you are still in the process of asking for directions when setting up a small business, then there is no need to register the company right away. You can start with self-employment.
Question 3: Do you have a partner?
If you have two or more partners, I suggest using a limited liability company and establishing a relatively complete shareholder agreement. The best and most long-term cooperation in the business world is for brothers to settle accounts openly and clearly spell out the interests and relationships, making it easier to sort out problems when encountering them.
