For many years, Tennessee has been one of the best places to live in the United States. This distinction is thanks to many attributes of the our state, including a thriving small business-based economy. If you have a great idea that would be profitable, there is no better time or place to consider starting a business. One of the best business entities to create when thinking about opening a new enterprise is a limited liability company (LLC). These types of entities are by far one of the more popular business entities among start-ups in Tennessee, and here's an overview of why that is the case.
There are a few business entities such as sole proprietorships and general partnerships that do not necessarily protect the owner or managers from personal liability. So, if something happens and you get sued – for example, you have serious debts and can't pay them, or someone is injured at your business – your personal assets could be at stake.
On the other hand, an LLC protects its owners, managers, and members from personal liability. If the company takes an action that could result in a lawsuit, you don't have to worry about your personal liability that some sole proprietors or general partnerships experience.
Keep More Profits
Much like a partnership or sole proprietorship, the business income of an LLC passes through the owners/members, meaning it goes directly to you. Plus, with an LLC, you can choose to be taxed only once – you are not taxed at both the company and individual levels, which is the case for certain corporations. As such, you and all other owners get more profits because you are taxed only once on those profits.
Additionally, you can choose how to distribute profits with this type of entity if you have a well written operating agreement. For example, if you wanted to receive 70% of the income and the other member receives only 30% you can structure your operating agreement to achieve that. Whether you created the LLC as a family business or as part of a larger estate plan, having flexibility with profit distribution is a key advantage.
You Get More Flexibility
Whether it's the structure of the business itself or the way profits are distributed, you have flexibility with an LLC in Tennessee. Flexibility allows for customization so that your personal needs and business purpose are accommodated.
However, because of this flexibility, it is important to seek the counsel of an experienced business attorney in Clarksville. You want to make sure you maximize the benefits of this type of company by making the right decisions in its formation.
You Have Less Paperwork
LLCs are comparatively easy to establish in Tennessee. They generally require minimal paperwork. Unlike corporations, you don't have to worry about shareholder agreements, bylaws, or issuing or tracking stock certificates and ledgers. You also do not have to comply with many of the same formalities and requirements that corporations must follow. Properly formed, LLCs provide significant advantages
The Key Takeaway
The key takeaway is this: it's a great time to start an LLC, whether it is in Clarksville specifically or Tennessee generally. These business entities benefit startups in ways that corporations or other business entities do not. Consult with a business attorney in Clarksville to make sure you start out on the right foot.