Many doctors, lawyers and accounting professionals build businesses around their work. They often consider forming a limited liability company (LLC) for the advantages it offers. If you’re thinking about going this route, here are three benefits of building an LLC for your business.
Protecting your personal property
An LLC creates a legal barrier between what you own personally and what your business owns. This “limited liability protection” means that, usually, if someone sues your business or your business owes money, they can only go after what the business owns, not your personal holdings.
For instance, if someone sues your medical practice for malpractice, your personal savings, your home and other personal property are usually safe. This protection is very important for doctors because they often face lawsuits.
Tax advantages
LLCs offer flexibility in taxation. You can choose to be taxed like a sole proprietorship, a partnership, an S corporation, or a C corporation. It depends on what’s most advantageous for your situation.
Many medical practices choose “pass-through” taxation. This means the business’s income is reported on your personal tax return. This can help you avoid paying taxes twice, which sometimes happens with other business types.
Management flexibility
LLCs provide flexibility in terms of who manages what, with fewer formal requirements than corporations. This flexibility means you can run your business the way you want. For example, you don’t have to have a board of directors or hold regular meetings with shareholders. You can also easily change who owns the business if you add or remove members as your business changes. This is helpful if your business experiences rapid changes yearly.
While there are many good things about having an LLC, it’s important to know that creating one has specific legal steps and rules. There can also be some downsides to forming one. Consider consulting with a legal professional who has experience in Michigan’s regulations to protect your business.