Sure, the simplicity and affordability of running your business as a sole proprietorship might have appealing incentives, but there are reasons why you might actually benefit from forming an LLC taxed as an S-corp.
1. You’re not personally liable for company debts
Undoubtedly the greatest benefit from forming an LLC, your personal assets are safe if your business runs into financial or legal troubles. You and your business are essentially two separate entities, keeping creditors from going after your bank account, house, etc.
2. Your self-employment tax obligation is lowered
When operating as a sole proprietor, there is no separation between you and your business, meaning all of your profits are subject to self-employment taxes. S- Corp status means you only pay self-employment tax on your wages and salaries rather than all of your business profits.
3. Your credibility is heightened
You want people to know you mean business. Operating as an LLC may help a new business establish credibility with potential customers, vendors, and partners. The mere visual of having "LLC" or "Inc." after a business name shows that the owners have made a formal commitment to their business.
The formation of an LLC will have some additional costs involved, however, the benefits greatly outweigh these initial expenses. If you would like to find out more or have questions on which entity structure is best for your business, feel free to give us a call. We are happy to help.
BluePoint Financial, LLC
151 Regions Way, Suite 6B
Destin, FL 32541