With more individuals looking to establish their businesses, one of the most critical questions they face is choosing a suitable business structure. A limited liability company (LLC) is a strategic choice for those in Georgia looking to start a business. In 2021 alone, they made up 71.7% of all partnerships. An LLC is a hybrid structure that incorporates the features of a sole proprietorship with that of a corporation. It protects the owners from lawsuits and debts by reducing legal liability.
Personal Liability Protection
Limited Liability companies, as the name implies, have limited legal liabilities as an LLC is considered a separate legal entity from its owners (members). In the event of legal judgments or business debts, an LLC structure ensures the safety of your personal assets, like your bank account, home, and car. This clear distinction between business and personal liabilities serves as a safety net for entrepreneurs, encouraging them to take risks to grow their businesses.
Tax Advantages
The IRS recognizes LLCs as pass-through entities whose income is directly passed to the owners or investors, except C-corporations whose shareholders are taxed separately from the entity. As a pass-through entity, double taxation, which occurs when corporations pay tax on income and shareholders pay tax on dividends they receive, can be avoided. Additionally, for a pass-through entity, the company’s income is not taxed at a corporate level.
While a start-up business can be your way to freedom, the costs, including filing fees, rent for an office space, licensing, and permit fees, can add up quickly. However, the IRS lets you write off many of these expenses as business tax, lowering the amount you owe on income tax or the business owes as a corporation.
Moreover, Georgia does not levy a franchise tax imposed by the US government in certain states on business as a right to exist. Also called a “privilege tax,” it gives businesses the right to operate within a state. The elimination of this tax reduces the overall amount of money spent, making Georgia an attractive place for entrepreneurs.
Flexibility in Management and Ownership
Unlike a corporation, which requires a board of members, an LLC can be managed by the members or appointed managers, offering great flexibility in management. This allows entrepreneurs to forge their path and continue with business in a way that suits their goals and operational needs.
In addition to management, there is great flexibility of ownership. Firstly, there is no restriction on the number or types of members an LLC can have, ranging from individuals, corporations, or other LLCs. Secondly, you can easily change the ownership structure to include another investor or remove one, adjusting the share percentages according to agreed terms without complex legal reconstruction.
Ease of Formation and Maintenance
Starting an LLC in Georgia is a straightforward process. The state offers an online filing system, making it easy to pay the associated fees and file Article of Organisation. The initial filing fee in Georgia is around 100$, relatively cheaper than other states, for example, Texas, where the initial filing tax is 300$.
While the state does require members to file an annual registration fee, it can be filed online for a small fee. Entrepreneurs can focus more on expanding their business rather than being bogged down by administrative duties owing to LLC’s ease of formation and low maintenance requirements.
State-Specific Benefits
Several state-specific benefits make Georgia an ideal location for forming an LLC. The state has an environment that favors business growth with its expansive economy and wide range of industries. Furthermore, the cost of living in Georgia is relatively low compared to other states, minimizing overhead costs.
Endnote
With personal asset protection, tax advantages, ease of formation, and flexibility of ownership, choosing an LLC for your business structure stands out as a smart choice. Choosing an LLC for your business structure sets you up for financial success by ensuring maximum ROI and provides a good foundation to thrive in the competitive business landscape.