Do I Need an LLC to Start a Business?

September 20, 2019

One of the biggest questions asked when new business owners contact someone for Los Angeles tax preparation services is whether they need to form an LLC to start their business. This quick guide will help you determine whether you need to form an LLC and what the benefits are to doing so.

The Short Answer

The short answer is that you do not need to form a limited liability company in order to operate your business legally. However, you still need to go through the proper legal channels to operate your business. If you decide not to form an LLC, you have two other legal options.

Your first choice is to file paperwork with the state that allows you to operate as another type of legal business entity. There are advantages and disadvantages to each option, so it is important to consider them all before deciding on one. If you do not want to create a formal business entity, you can also work as a sole proprietor. Los Angeles accounting professionals will tell you this option is the easiest and most affordable one, and is especially beneficial if you’re unsure how involved in business you want to be. Keep in mind, though, that it offers no legal protections for your business.

Benefits of Forming an LLC

There are several benefits to forming an LLC. For one thing, it offers personal liability protection. Should your business be taken to court for some reason, your personal assets will not be part of a settlement. An LLC also shows more professionalism, makes it easier for you to find investors, and ensures you have a protected business name that nobody else can use. None of these options are available should you choose to work only as a sole proprietor.

If you aren’t sure if running a business is your ultimate goal, there is nothing wrong with starting as a sole proprietor. You can also update to an LLC later. However, if you’re 100% certain of your business goals, it’s best not to wait to form your LLC. A Los Angeles accounting firm can provide you with more information to help you make the best choice for your company.