Home Improvement

LLC Meaning: What Does LLC Stand For?

Want to start a new business? You aren’t alone. More than 627,000 new businesses get started each year in the US.

The problem, though, is that many of these new businesses are going to fail within their first few years. Not exactly an encouraging sentiment.

There are many reasons that new businesses fail so quickly. But there are also many ways that new business owners can reduce risk and increase their chances of success, such as forming an LLC.

Wondering about LLC meaning and how it can increase your chances of survival in a hyper-competitive business environment? Keep reading below to learn the meaning of LLC and see how this legal structure works.

The Problem With Sole Proprietorship

When you go into business without forming any type of legal entity, you are operating as a sole proprietor by default. This is due to not forming a corporation.

As far as legality is concerned, there is no protection. If you do something wrong, a customer or vendor can sue you and come after your personal assets.

And as far as taxation is concerned, you would just pay normal income taxes on the profits from your business. It’s easy and free, as there is no extra paperwork involved.

But it’s also how many new businesses fail. Without proper protection in place, one incident could wipe out your business and all of your personal assets, such as your savings and your home.

That’s why most smart business owners and aspiring entrepreneurs get an LLC right away. But what does LLC mean in real life, and how does it benefit you?

LLC Meaning

So what is the meaning of LLC? It stands for limited liability company.

An LLC is a separate legal entity. It means that your business is separate from you and from your personal life and finances.

The debts of the business are not the debts of the owner and vice versa. If someone were to sue your LLC, they could only sue it for what the business has. They could not also come after your personal assets.

So even if your business fails at some point, it wouldn’t wreck your personal finances as well.

Who Should Get an LLC

Before deciding if an LLC is right for you, it’s important to know that an LLC is not a corporation. A lot of people think they are one and the same, as they think the “C” stands for “corporation.”

But the difference between corporation and LLC options is that they offer specific taxation benefits over an LLC. C corporations are a good structure for businesses that sell products and have a storefront, while an S corp is better for companies providing services.

LLC vs. corporation, which is right for you? If you are a lone entrepreneur or starting a new, small business, an LLC is probably the right choice upfront. As you grow, you might find that incorporating may be a better decision.

Protect Yourself and Your Business

Now that you understand the LLC meaning as a limited liability company that offers protection for the owner, it’s time to get legalized for yourself. Pay the extra money to form an LLC as early on in your business journey as you can.

You never know when something might happen. But when it does, you’re going to be glad there’s protection in place to keep you going.

Looking for more tips like this? Head over to our blog now to keep reading.

Related Articles

Back to top button