Business Organization: The Pros and Cons of an LLC in Michigan

When starting a business in Michigan, you need to decide how you want it to be organized from a legal and tax perspective. There are quite a few options, but for many people, the Limited Liability Corporation, or LLC, is a great choice. Learning more about the pros and cons of an LLC will help you determine if this is the right choice for you in your specific situation.

Benefits of an LLC

LLCs are quite popular in Michigan, and with good reason. There are quite a few advantages that can really make this the best choice for you. Read through the following primary benefits you will enjoy by setting your business up as a Limited Liability Corporation:

  • Federal Tax Advantages – When your business is an LLC, you are able to choose to file your taxes as a partnership, a sole-proprietorship, or a corporation. This flexibility can help you keep your tax burden to a minimum, which can save you thousands each year.
  • Protection from Personal Liability – The main reason that LLCs were developed is to help limit the personal liability of the business owners. An LLC creates a clear legal wall between the business entity and the individual(s) who own it. If someone sues your business, for example, they will not be able to take your home or other personal assets.
  • Division of Profits – Distributing the profits of your business can be difficult as a partnership since they are supposed to be split 50-50. With an LLC, however, you have far greater flexibility in where the profits are spent.

Disadvantages of an LLC

While there are obviously a lot of benefits to going with an LLC, there are also some disadvantages to be aware of. The following are some of the most significant problems that may make an LLC a bad choice for your business:

  • End of the Business – If you choose a corporation for your business, the business itself will continue to exist even if you pass away or go bankrupt, which is not the case with an LLC. This makes it much easier to pass the business on to others should it become necessary.
  • Going Public – Taking your business public is a lot easier if it is already a corporation. An LLC is not set up to be able to issue shares or have a truly corporate business structure that is necessary for trading on a stock market.
  • Complex – Running a business as a sole-proprietorship or a partnership is very simple from a tax and legal perspective. Becoming an LLC adds in some additional complexity and other steps you have to take. It is, however, simpler than a full corporation.

Talk with a Business Attorney in Michigan

The best way to decide how to organize your business is to talk with a business attorney. We will be able to look at your situation objectively and ask you the right questions to determine what the best course of action will be. Contact us to schedule a consultation today.