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The advantages and disadvantages of forming an LLC

On Behalf of | Jul 19, 2022 | Business Law

An LLC, or limited liability company, offers legal and financial protection to business owners who operate as individuals rather than through corporations or trusts. LLCs are formed in every state, and their structure and formation requirements differ from state to state. Here are some of the pros and cons of forming an LLC in Louisiana.

Benefits of an LLC

An LLC provides limited liability protection for its owners so that their personal assets are protected from debts and liabilities incurred by the business. This can be a major advantage for businesses with high risks or large amounts of debt. This setup may also protect members’ personal assets like their homes and cars. If you are in a profession where accidents are common, this type of protection is especially valuable.

Another pro is that if you form an LLC you will be taxed as a separate entity, so your business income will not be taxed along with your personal income. It also gives the company the ability to avoid double taxation, something corporations can’t do. Double taxation occurs when profits are taxed at both the corporate level and again when they are distributed to shareholders as dividends.

Other considerations

One downside to forming an LLC is the cost. You will have to pay the filing fee to the state, which is $100 in Louisiana.

Another downside of forming an LLC is that you’ll be required to file annual reports with the state. This can be expensive and time-consuming. If the LLC does not stay in good standing with the state under Louisiana business law, it could be dissolved.

Another disadvantage of forming an LLC is that it may be difficult to raise capital. Venture capital funds are often hesitant to lend money to LLCs because investing in them can result in taxable business income.

Thre are many pros and cons to forming an LLC. It’s a good idea to research Louisiana’s incorporation laws so that you know if it’s the right setup for your business.