LLC or El-el-else?

There is a handful of organizational structures that the business savvy can choose from when starting out. Hands down though, the Limited Liability Company is near the top of the list here in Arizona.

Advantages of an Arizona LLC

Limited Liability: As the name suggests, the owners, usually referred to as “members,” of an LLC have the limited liability protection of a corporation. This is meant to–and in large part does–protect the members from some or all liability for acts and debts incurred by the LLC.
Flexible Profit Distribution: LLCs have tremendous flexibility in choosing profit distributions, unlike partnerships for example where there is typically a 50-50 split.
No Minutes: Corporate structures are required to have meetings, keep records of minutes, and record resolutions as well as file annual reports. All expenses of time or cash, all not necessary with an LLC.
Tax Structures: All business losses, profits, and expenses of the company flow to the individual members. There is no double taxation where one pays a corporate tax and an individual tax. In most cases, this will be a tax advantage though there are some circumstances where having a corporate tax structure can be favorable.

Disadvantages of an Arizona LLC

Limited Life: Unlike a corporation which lives forever, an LLC is dissolved when a member dies or goes into bankruptcy. If you are not the sole member of the LLC, you should probably supplement the organization with a buy-sell agreement to cover such circumstances. Otherwise, you could find the deceased or bankrupt member’s interest going into an estate or being handled by their creditors.
The Public Option: If you plan on taking your company public in the near future or issuing employee shares, you will be better served by choosing a corporate structure.
Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity than an LLC.

In general, you’ll be well served by the LLC structure, but remember to look into the other organizational structures before making a decision. And, if at the end of the day you’re still unsure, talk to a lawyer. They’ll tell you what to do. They always seem ready to do that.