Up until now, getting a job always carried one of two expectations: performance of some labor, or qualifying oneself for a career with a degree. However, this is no longer the case, as the digital age has facilitated the creation of exponentially more businesses, particularly those without a physical headquarters.
Furthermore, there are now more opportunities than ever for young workers to form a business as a result of the benefits of the digital age. The most common business structure in the American economy is a limited liability company because it is the most geared towards new startups and small businesses. This article will explore the ways in which LLC formation is easier in this digital age, as well as why you should opt for an LLC.
The Growth Of Online Services
Of course, the internet provides a wealth of resources that prospective entrepreneurs can use to inform themselves on how best they can form their LLC. However, this is not the most effective nor valuable means in which the digital age has opened up opportunities for the formation of new LLCs.
Instead, this title goes to the growth of online incorporation services. These online services provide entrepreneurs looking to incorporate their businesses with all the assistance they could need in order to achieve this, in one place. The level of help they provide varies from providing online registered agent services to fully handling the incorporation of a business.
There are an infinite number of online incorporation services available online, a few of the most reputable and trustworthy include: ZenBusiness, Northwest, IncFile, BizFilings and LegalZoom.
Why Choose An LLC?
One of the primary reasons many small business owners opt for an LLC for their business is the simplicity associated with its maintenance: the documentation needed to form this business structure is negligible by itself, let alone when compared to that of any of the other structures, such as corporations.
That being said, the justifications for deciding to form your business as an LLC are far deeper than merely avoiding formation documents. As an illustration of this, many businesses choose to form as an LLC over an informal entity despite the additional paperwork this entails because of the personal asset protection LLCs provide.
All informal businesses have finances that are amalgamated with the personal finances of their owners. What this means is that, in the eyes of the law, there is no difference between business and personal finances. A consequence of this is that the owners’ personal assets, as they are tantamount to the business’s, can be used to compensate creditors if the business goes under.
Because of the limited liability protection afforded by the business structure of LLCs, they do not face the same issue. Furthermore, this structure places a separation between personal and business finances so that the former is precluded from being pursued by creditors seeking compensation for debts the business may owe.
In addition to this, LLCs experience beneficial taxation treatment by governments as they can choose the tax designation that is optimal for their circumstances. The two tax designations available for LLCs to choose between are that of a corporation or a pass-through entity.
If the LLC elects to be taxed as a pass-through entity, its profits will only be subject to one form of taxation – half as much as other business structures which must pay ‘double taxation’. In this LLC type, profits ‘pass through’ to owners, who then pay personal income tax.
Consequently, LLCs benefit from reduced taxation when compared to that of a corporation since they do not need to pay corporation tax. They may be liable to pay self-employment tax however, which corporations do not have to pay. Therefore, once LLCs surpass a certain threshold, it becomes worthwhile to elect to be taxed as an S Corp.
The digital age has made it infinitely easier and more convenient for entrepreneurs to incorporate their business as an LLC, capitalizing on the many benefits associated with this business structure.
For more information about llc formation, feel free to visit Incorporation Rocket’s guide on the topic.
Image Credit: Incorporation Guru