LLC and Growth

In today's blog, we will discuss why an LLC is a good business entity for growth purposes. First of all, an LLC is not the best entity for all business owners. An LLC is a good business entity if you are entrepreneurial and intend on building a company that is greater than four employees or owners. S corporations are great business entities for those that will have one to three employees and have big goals, but few owners or employees.

LLC and Flexibility

An LLC is the most flexible business entity other than a partnership. A partnership is two or more people coming together and forming a for-profit business. A partnership has no limited liability protection. In contrasts, an LLC adopts the flexibility of a partnership and the limited liability protection of a Corporation.

Flexibility is important because varying shareholders or owners have different interests. For example, angel investors or investors in general may want to be limited business owners because they do not want the risks inherit of a business. Furthermore, the angel investors or investors may want to be first in line to obtain their investment back in case of bankruptcy or corporate dissolution.

Flexibility is also important if you want to build a world wide company. An LLC can offer membership interests similar to stock options. Unlike stock options, the LLC can design a benefit's package where the employees get a percentage of profits or otherwise called "income partners". Stock options reward an employee when the business is sold. Unfortunately, most business owners have to find a way to pay the employees adequately enough until a business is sold. Therefore, an LLC is a good business entity for growth purposes.

In conclusion, an LLC embraces innovation and change. Whatever you can imagine can basically be drawn up with an LLC. In contrasts, an S corporation only allows voting shares. Thus, an S corporation is a horrible business entity for angel investors or investors.

Sean Robertson, Esq.
Robertson Law Group, LLC
(312) 498-6080 or (630) 364-2318
Serving Naperville, downtown Chicago, Cook County, Dupage County, Will County, Kane County, Kendall County