1. Cheapest LLC
2. LLC Advantages
3. LLC Disadvantages

Cheapest LLC

The cheapest LLC depends on the state where you live, but registration fees for LLCs are generally inexpensive. First, you must decide which type of LLC suits your business most. Cost could be a major issue when deciding, especially when you have yet to make money. The good news is that an LLC formation is the perfect option if you are watching your seed capital carefully.

LLCs also offer certain things that may not be suitable for all businesses. For instance, sole-member LLCs must choose a corporate or sole proprietorship taxation under federal law, which could affect profit margins and tax liabilities. The best option depends on your business plan and your short and long-term goals.

In general, starting a new business can be an expensive task, and your start-up costs could surpass the available cash you have. Therefore, you should look to save wherever possible. LLCs provide advantages in regards to profit taxation, while giving you greater flexibility when it comes to management structure.

LLCs are more flexible than a corporate structure, but you may want to consider a corporate entity if you need to raise capital from investors. However, you may convert your LLC into a C corp at a later date, and starting as an LLC is a great for starting a business.

The most notable features of an LLC is its pass-through taxation method, where profits and losses flow from the business to individual members. Members would then file such losses and profits on their individual tax returns accordingly.

An LLC is fast and easy to establish. You can determine who your members will be and how much they may own in the LLC percentage-wise. Another good thing is that you do not have to contend with regulatory hurdles that C corps must follow.

LLC Advantages

Other LLC advantages including the following:

  • Liability Protection: Members do not hold responsibility for business debts unless the courts pierce the corporate veil. Piercing the corporate veil entails getting around liability protection, which most likely stems from the financial wrongdoing on the part of members. For instance, mixing personal and business assets could pierce the corporate veil.  
  • Management Flexibility: Members may tailor their management structure how they see fit. You should draft an operating agreement, which outlines the basic management structure of your business.
  • Pass-through Taxation: Because members only pay taxes on their individual returns, they do not have to worry about business taxes

LLC Disadvantages

With that, you should be aware of the disadvantages:

  • Corporate Veil: The corporate veil can be easier to pierce than corporate entities because LLC law is not as established as corporate law.
  • Franchise Taxes: Your LLC may need to pay franchise taxes, depending on the state where it is registered.

In addition, LLC laws generally vary from state to state. One thing you must keep in mind is that you must file an articles of organization to officially register your LLC, and the fee depends on the state you live in. If you intend to hire employees or service personnel in the form of attorneys or accounts, you would also need to pay separate fees for such services. You can save your money by creating an articles of organization on your own, and many states offer blank forms that you can complete.

The articles of organization generally does not require much of your time, and you are simply filling out basic information about your LLC.

  • Note: You may hire an incorporation service if you do not wish to file an articles of organization on your own. You may find various companies online that specialize in such services.

Also, you may contact companies that will help you file the appropriate paperwork. Remember that they cannot give you legal advice, and you should contact an attorney if you need legal counsel.

When it comes to the articles of organization, states generally mandate that it must be registered with the secretary of state office of your state. Once you create your business, you should look for other ways to cut excess expenses so you can save as much money as needed.

You may consider various strategies to save money:

  • Work from home
  • Rent office equipment
  • Digitizing records instead of printing out copies

To learn more about the cheapest LLC, submit your legal inquiry to our UpCounsel marketplace. UpCounsel retains some of the best lawyers who will give you vital information on the best entity for your business needs. They will also provide insight on the best tax-saving strategies so you have additional capital for your business.