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Pros and Cons of LLCs

LLCs are a popular legal business form for small businesses. Discover what LLCs are, and what their advantages and disadvantages as a business model are.

What is an LLC?

LLC stands for “limited liability company.” LLCs have become the legal business structure of choice for many small business owners, because they combine some of the advantages of various other legal business forms.


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Pros of LLCs

  • Owners of an LLC get the benefit of limited personal liability, just as owners of a corporation do.
  • LLC owners can take advantage of pass-through taxation, like sole proprietors and owners in a partnership, instead of double taxation as a corporation.
  • LLCs can be less expensive to start, and involves less paperwork, than corporations.
  • LLCs can have a single owner or multiple owners, depending on its location.

Cons of Sole Proprietorships

  • Some states don’t allow single owners of an LLC.
  • LLC income can be subject to self-employment tax.
  • LLCs can be more expensive to launch as opposed to sole proprietorships or partnerships.

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