Your Guide to LLCs vs. LLPs
Starting a new business is an opportunity of a lifetime. You have always believed in your skill and competence as a businessperson. Establishing your own company is something you have always wanted and are now ready to realize. You may think the market is ripe for your kind of business. However, you never know what factors may converge to hinder or ruin even the best-laid plans. When setting up your company, you will have to think carefully about protecting you and your family. A business lawyer Seattle will advise you on the kinds of businesses, like LLCs and LLPs, that will limit your personal liability.
Two options are a limited liability company (LLCs) or a limited liability partnership (LLPs). These are not difficult legal operations to establish. Seattle business attorneys specialize in helping entrepreneurs get their companies off the ground. There are differences between the two that it is important to know about.
A Limited Liability Company
A limited liability company (LLCs) is a separate business entity with one or more owners. You can create an LLC by filing the right paperwork with your secretary of state. Seattle business lawyers know how to file articles of organization, and they can help you create an operating agreement. They will also help arrange a bank account and tax identification number for the business.
Limited Liability Partnership
A limited liability partnership is a general partnership with even more limited liability conditions. Like an LLC, an LLP is formed by submitting the appropriate paperwork to the state. A bank account and tax identification number will also need to be arranged.
Protecting Your Personal Assets
Both of the above legal entities protect you against personal liability for any failures sustained by the business. The idea is to limit your liability to the amount of money you invested in the business. By establishing the business under either of the above terms you will not be held liable for the debt incurred by the company as long as you keep your business and personal lives separated. You will also be protected if the company is sued.
An LLC can opt to be taxed as a sole proprietorship or corporation. An LLP must file as a partnership. Filing as a corporation or partnership means the income assessed is that which has come through the business. Both LLCs and LLPs can take advantage of the 20% pass-through deduction, which means that you can deduct up to 20% of your business profits from your personal tax return.
Take Your Time
You should not rush the decision on which kind of business entity to form. You should consult with a Seattle business attorney before you make your final choice. A business attorney Seattle will help you weigh the pros and cons of each business structure. Once you have made your choice, you will need to stick with it, as it can be costly to change a business structure once you have made the state filings. To make the right decision, you will have to decide what is most important to you.
If your main concern is limiting liability and taxation, then creating an LLC is your best option. You must also be aware of certain limitations. LLPs have particular rules about control and participation.. You must also consider the nature of your company. Some states have restriction on who can utilize the LLP format.. The Seattle business lawyers you hire will inform you of the rules in Washington state.
If you are on the cusp of opening your own business, then you should think clearly and critically about the legal structure of the company. You should speak to business litigation attorneys Seattle at the law firm of Frey Buck.