For many South Dakota businesses, forming a Limited Liability Company (LLC) is an excellent business choice. Here are three reasons why forming an LLC may be a smart idea.
Reason #1 – Tax Benefits
The IRS does not consider an LLC to be a separate entity for tax purposes. This means that an LLC doesn’t pay taxes directly. Instead, the business income is taxed through the personal tax returns of the owners.
Reason #2 – Simplicity
Compared with other corporations, an LLC is much simpler to run. While a corporation requires a board of directors, officers, and regular meetings, an LLC does not require these formalities. It can be run day-to-day as though it were a partnership, even though it has some of the liability and tax protections of a corporation. There is usually no need to get approval from a board before taking business action – one of the key benefits of an LLC. This simply makes running an LLC easier on business owners. With less stringent requirements for compliance and paperwork, an LLC is easier to form and keep in good legal standing.
Reason #3 – Limited Liability
Like corporations, an LLC provides its members protection from liability. This means that members are not personally liable for debts or court judgments incurred by the LLC. Creditors are stopped from seeking the personal assets of the LLC’s members. It is a meaningful shield not provided in a sole proprietorship or traditional partnership.
For example, if you decide to open a main street business that deals directly with the public, you may worry that your liability insurance won’t fully protect your personal assets from potential slip-and-fall lawsuits or claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better, because it gives you personal protection against these and other potential claims against your business.