Forming a limited liability company is a crucial step for many small businesses. Rather than continue as a sole proprietorship, an LLC helps you avoid liability and pay taxes as a company rather than an individual. Utah residents may file for an LLC with the Utah Division of Corporations and Commercial Code.
However, you might still resist the transition to LLC. See below for a brief overview of the LLC business entity and how it might help you.
Prevent personal liability
For the most part, sole proprietorships are only for low-profit and low-risk businesses. Anyone can start a sole proprietorship, but as soon as you begin to grow a customer base, you run the risk of lawsuits. If you sell a product or service that has inherent risk, your customer might decide to sue you for damages. Without an LLC, you must pay for any losses from your assets. LLCs can file for bankruptcy without risk to your home, car or savings account.
Use flexible tax structures
Single-member LLCs can take advantage of pass-through taxation. This allows you to avoid corporate taxes and pay personal income taxes on your profits. The Internal Revenue Service treats LLCs as sole proprietorships for tax purposes. However, LLCs still have the option to pay their taxes like a C or S corporation. Sometimes, it is more profitable to become a shareholder in your company and pay the flat corporate tax rate.
Creating an LLC gives you more flexibility for your business. It allows you to avoid individual liability and choose the tax structure that makes sense for the company.