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Running a small business can be a challenge, particularly as the recession continues to grip. Having to weigh up all the options to expand, and increase your market share, can be fraught with perils. However, one more recent option is to set up a Limited Liability Company (LLC). Starting an LLC is quite a straightforward affair, but there are basics you need to be aware of before starting in the journey.
An LLC is similar to a corporation, in that as a separate legal entity, the liability is limited to all members involved. In most states, LLCs can be created by a single person. This is not the case with many other corporate structures. However, it is not limited to the number of people that may join, and is also able to be affiliated with other businesses.
Further benefits allow LLCs to operate differently too, with there being no need for directors meetings, annual reports and the like. Tax returns are also filed according the individuals in the enterprise, rather than filing for the entire business.
Profits can also be divided more fairly, so the person completing the most work for the LLC will have a greater share, rather than the usual way where dividends are split equally amongst all shareholders, dependent on the amount of stocks held.
As with any structure, there are disadvantages also. It can be trickier to generate external funding. Seasoned investors are less inclined to have a silent stake, knowing their dividends will be reduced that with more traditional arrangements.
Setting up nationwide could also be problematic, with many states having different rules to the operation of an LLC in their area. If this is a consideration, you will need to spend some time to research any penalties, taxes and fees that could possibly be sought.
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