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When is it time to start an LLC?

On Behalf of | Feb 9, 2021 | Business Formation |

A limited liability company, or LLC, is one way that you can classify your business for legal purposes such as paying taxes to the Internal Revenue Service. There are tax benefits and perks to doing this, making LLCs the most popular form of business structure that exists today.

LLCs aren’t usually the first form for small businesses, which tend to start off as sole proprietorships. That being said, it can be smart to change your sole proprietorship into an LLC if you want to protect your assets and get the extra tax benefits of an LLC.

When is it the right time to start an LLC?

Perhaps in the past you sold items that couldn’t hurt someone, like stickers or stationery. If you decide to add products that are more dangerous, like pieces of light machinery or sharp items like knives or scissors, you might decide that you want extra protection against liability if someone gets hurt because of defective products.

You might also decide that it’s time to form an LLC if you go from a company that doesn’t work with the public to one that is public-facing. If you used to hire out for services you offered but will be bringing them in-house, you may be opening yourself up to more liability and should consider changing your business structure.

Should you have an LLC if you’re going to hire employees?

If you decide that you want to hire employees, an LLC is one possible option to look into. There are many business structures available, so it’s a good idea to speak with your business attorney about which would be best for your circumstances and the number of employees that you want to bring on board.

Keep in mind that an LLC is only one of the many business structures that you can choose from. It’s smart to look at each one and match them up with your goals. Depending on how you run your business and your concerns about taxes or liability, you may find that an LLC is or is not the right choice for you right now.

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