It’s often said that the best place to learn about business is at the school of hard knocks. As with most adages, this one has at least some element of truth; there are certain facets of entrepreneurship and business leadership that are best learned experientially.

At the same time, there are more technical aspects of running a business that can and should be demonstrated in an academic setting, equipping students with knowledge that might empower them to pursue their own entrepreneurial dreams.

Case in point: The nature of the Limited Liability Company, or LLC. This legal structure, when properly leveraged, can provide first-time business owners with some important protections, tax advantages, and peace of mind. But in order to reap these benefits, budding entrepreneurs need to be educated about what an LLC actually is, how to register one, how to select the best LLC services, and beyond. 

The empowerment that a proper LLC education can offer may make all the difference between the decision to go out on a limb, or to remain firmly enmeshed in the life of a nine-to-five employee.

Defining the LLC

The LLC is one of a few legal structures available for business owners, along with things like the Sole Proprietorship and the Corporation. The LLC has long proven to be the most popular legal structure among entrepreneurs, offering more robust legal protections than the Sole Proprietorship, less administrative hassle than the Corporation. It’s the “just right” solution that so many first-time business owners desire.

Key to understanding the LLC’s utility is the fact that it creates a legal distinction between the business and the business owner, regarding each as a unique legal entity. As such, personal assets can be kept entirely out of business matters, something that might give younger entrepreneurs some reassurance as they consider the risks involved with launching a new company.

Choosing the LLC for a Business Startup

Indeed, there are a number of reasons why the LLC structure makes sense for first-time entrepreneurs.

Personal Liability Protection

Because business assets and liabilities are distinct from the business owner’s assets and liabilities, there are built-in legal protections. More specifically, if a creditor comes after the business, the owner’s personal resources (including their bank account, their home, and their car) are off-limits. Likewise, lawsuits cannot come after an entrepreneur’s personal assets, except in the rarest of instances.

For entrepreneurs who desire to start a company but are wary of taking on too much personal risk, the LLC’s protections can be a saving grace.

Tax Flexibility

An aspiring entrepreneur may understandably have some wariness about paying a corporate tax rate. Luckily, by choosing an LLC, they don’t have to. 

LLCs provide multiple tax options, with the default position being taxation on a pass-through basis. Simply put, this means the business owner reports profits on their personal tax return, and pays their normal tax rate. It’s clean and simple, though entrepreneurs who do wish to be taxed at the corporate level can choose this option, as well.

Ease of Maintenance

There are obviously going to be some administrative burdens (and associated costs) with any type of business structure, but registering an LLC is relatively easy. Requirements vary from one state to the next but generally an entrepreneur just has to file some basic paperwork and pay a nominal filing fee. In some states, this is as little as $20.

Management Flexibility

A first-time entrepreneur may desire some wiggle room with regard to how they manage the day-to-day operation of their business. An LLC offers exactly that, allowing business owners to choose whether they want to run things on their own or bring in partners; and, to clearly denote the allocation of managerial responsibilities.

Educating the Next Generation of Entrepreneurs

While the LLC structure may not be ideally suited for every business owner, it’s certainly something that budding entrepreneurs should know about. Any basic business education should school students in the legal structures they have at their disposal, also counseling them in how to register their business, how to choose an agent, and more.

Simply knowing about the protections offered by the LLC format may be just what a would-be entrepreneur needs to take a leap of faith. For this reason alone, LLC education is a critical endeavor.

Author Bio

Amanda E. Clark is a contributing writer to LLC University. She is a graduate of Eastern Michigan University and holds degrees in Journalism, Political Science, and English. She became a professional writer in 2008 and has led marketing and advertising initiatives for several Fortune 500 companies. She has appeared as a subject matter expert on panels about content and social media marketing. She regularly leads seminars and training sessions on trends and tactics in professional writing.