Formation and Maintenance Costs
- LLCs can be expensive to form and maintain.
- States have rules about LLCs.
- The main LLC cost is the state filing fee of $40-$500.
- You can form one yourself or use a service.
Liability Protection and Member Disputes
- LLCs may not offer the liability protection of a corporation.
- LLCs can bring disputes between members over operations or profit distribution.
Taxation Complexity
- Another LLC downside is tax status complexity and the risk of double taxation.
- Profits can be taxed at both corporate and personal levels.
- Members owe self-employment tax.
Legal Risks and Personal Asset Protection
- LLCs can bring disputes between members over operations or profit distribution.
LLCs are hybrids of corporations and partnerships:
- Corporations limit liability.
- Partnerships enable pass-through taxation.
Note: Not every organization can be an LLC.