LLC Benefits

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LLC Benefits


Benefits

Limited liability companies (LLCs) are a business structure in the United States that helps to separate personal assets from that of a business. The owners of an LLC (called members) are given complete liability protection for their own assets. Should the business suffer from debts, be sued, or fall into legal trouble, the owners will not be liable for the company's debts or liabilities. Limited liability companies are hybrid entities with characteristics of both corporations, along with a partnership or sole proprietorship based on the number of members.

What are the Advantages of an LLC?


What are the Advantages of an LLC?

Limited Personal Liability

Sole proprietorships and partnerships are considered the same entity as its owner. This means that any business debts are also personal debts. When it comes to being accused of negligence, your personal assets can be claimed in a lawsuit.

LLCs are their own entities, and completely responsible for their own debts and obligations. Although you can lose the money you have invested in the company, your personal assets are untouchable. Even if an employee, a partner, or a business is sued, your personal assets will be protected.

Tax Advantages

LLCs, give a variety of options when it comes to taxation. LLCs are able to elect (choose) tax status. The choice is available of sole proprietorships (as a single-member LLC), partnerships (with more than one member), as well as an S corporation or C corporation.

One of the huge tax benefits of an LLC is that it is given “pass-through” taxation. This means that the LLC itself does not pay any LLC taxes or corporate taxes. Instead, the LLC’s income is passed to the owners. The owners will then need to pay taxes on their own personal tax returns.

Flexibility

There are different forms of flexibility awarded to LLCs. The first is flexible profit distribution. LLCs can choose how they wish to distribute profits to the owners. This means even if there are two partners, they do not need to be paid out equally. As compared to corporations that must distribute profits to shareholders according to the number and types of shares they hold, LLCs are much more flexible.

Another form of flexibility comes with ownership. S corporations enjoy pass-through taxation, but there are many restrictions when it comes to ownership. LLCs also provides pass-through taxation, but there are no restrictions on the number or type of owners they can have.

Finally, as an LLC the management structure is given the flexibility that a corporation is not. Corporations are required to have a board of directors that oversees the company policies and officers who run the day-to-day business. In an LLC, there is no formal structure. You may make choices about how you want to run the business and make day-to-day decisions.

Privacy Protection

When forming an LLC anonymously with a registered agent in the state of New Mexico, you can be given complete privacy. Your name will not be linked to your LLC at all. The only thing you need to be aware of is that your registered agent must be available at a physical address during business hours in New Mexico if that is where you choose to form.

Less Paperwork

Corporations also offer limited liability but at the expense of a variety of requirements. Corporations must hold annual shareholder meetings, make annual reports, and pay annual fees to the state. This means that they also need to take a huge amount of recordkeeping requirements. LLCs do not need to follow these requirements of paperwork or keep extensive records. In New Mexico, LLCs do not even need to file annual reports.

What are the Disadvantages of an LLC?


Frequent Questions
  • Some states charge annual filing fees, but New Mexico is not one of those states.
  • Income splitting is available, but you will be subject to self-employment taxes.
  • Transferability restrictions where in order for a member to leave or join, all members must agree or be notified.
  • Although New Mexico does offer asset protection for single-member LLCs, some states face reduced asset protection as a single member.

Who Should Start an LLC?


Checklist

If you are just starting your business or you are already operating as a sole proprietor, then you may want to consider forming an LLC for asset protection. This is because LLCs limit your personal liability, and can offer a lot of flexibility when it comes to ownership and management. There are also huge benefits to taxation.

In New Mexico, there are a variety of professionals allowed to operate through an LLC. These include:

  • Certified public accountants
  • Registered public accountants
  • Chiropractors
  • Optometrists
  • Dentists
  • Osteopaths
  • Podiatrists
  • Architects
  • Veterinarians
  • Physicians and surgeons
  • Attorneys
  • Life insurance agents

How a Business Lawyer Can Help


Question

When forming an LLC in New Mexico you want to ensure that you file properly, and stay in compliance. Lawyers can also help to determine whether or not it is the right decision for you. State offices cannot provide you with legal advice, and there are many requirements to operate effectively. Overall, you want to ensure you have an operating agreement that dictates your right properly, therefore legal guidance is always a good option.

What's On Your Mind?

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