Benefits of Forming an LLC in Arizona
If you are starting a business, one of your options for organization is to form a Limited Liability Company (LLC). There are many advantages to forming an LLC, not just for business reasons, but also for your personal finances and estate. Phelps LaClair (with offices in Phoenix, Chandler, and Mesa) has helped many new businesses set up LLCs for investment protection and wise estate planning. We explained the basics of an LLC in a blog from April 2018. In this blog, we will go into more depth on the benefits of forming an LLC in Arizona for your new business.
One of the key functions of an LLC is to provide asset protection. Every business starts out with a plan to succeed. However, no matter how thorough the planning, there can be unforeseen circumstances that sink a business. In the event of bankruptcy or a lawsuit, the members of an LLC are not required to lose their personal money. Their personal property, such as homes and vehicles, are also exempt from liability and cannot be forced into foreclosure or seizure in order to settle a debt.
Unlike a corporation, LLCs are not required to pay taxes on company profits. Taxes on the income earned through the LLC are paid by the members on their personal income tax returns, much like a sole proprietorship. The benefit is being able to deduct business expenses that could offset other personal income you may have earned. Also, it’s possible to report a loss that you can carry over to offset income on future returns. Depending on your situation, these benefits can amount to very significant savings.
If your LLC has more than one member (e.g., more than yourself), you should have an Operating Agreement that defines the working and financial relationships within the company. This agreement will determine how the business operates vis-a-vis profit sharing, business decisions, and personnel changes. Having the agreement in writing establishes the legitimacy of the business as an LLC, should a lawsuit ever arise.
Phelps LaClair has been serving the Phoenix Valley for more than 40 years. Our thorough understanding of Arizona law, accounting, and tax regulations has enabled us to help many businesses get started on successful foundations. We understand the benefits of forming an LLC in Arizona. Give us a call, and together we can plan a successful strategy for you.
Need legal help setting up your LLC?
Give us a call today at (480) 892-2488 or email us at admin@PLEstatePlanning.com