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What are the pros and cons of forming an LLC in Michigan?


When starting up entrepreneurial ventures in Michigan, one of the first things you must do is determine the type of business structure you will use. One such organization type is the limited liability company, or LLC. We at Hubbard Snitchler & Parzianello PLC understand the considerations that go into making such a decision, and we have helped many fledgling businesses analyze the benefits and downsides of forming an LLC in order to determine if it is the option that is best suited for their circumstances and needs.

LLCs are a popular structure choice for medium- and high-risk businesses because they offer benefits of partnerships and corporations. One such benefit is the manner in which these entities and their owners, or members, are taxed. According to the U.S. Small Business Administration, unlike corporations, limited liability companies do not pay tax on their profits. Rather, the profits and losses from these companies are passed through to the owners’ personal income for tax purposes.

While you may not pay corporate taxes, which can result in double taxation, as an LLC member, you should keep in mind that you are considered self-employed for tax purposes. Therefore, you are required to pay the associated contributions toward Social Security and Medicare.

Although not completely separate entities from their owners like corporations, forming an LLC provides you a level of liability protection above that of sole proprietorships and partnerships. Since you would not be held personally liable for your company’s actions or debts, your personal property such as homes and automobiles would not be at risk in the event of a lawsuit or bankruptcy.

The type of business structure that you choose for your company may not only affect how you operate your business, but also the longevity and success of your venture. More information about this topic is available on our website.

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