What Are the Cons of a Limited Liability Company?
Many business owners choose to establish their businesses as limited liability companies because of the benefits, including protection of personal assets and tax advantages. But there are a few disadvantages to keep in mind.
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Identification
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A limited liability company is a cross between a sole proprietorship (or partnership if there are multiple members) and a corporation.
Paperwork
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A business owner must write up a significant amount of paperwork in order to establish an LLC. That includes filing articles of organization, which describes how the business is organized, and establishing an operating agreement that discusses the rights and responsibilities of members.
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Self-Employment Tax
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The managing member's profit from the business is subject to self-employment tax, just like a sole proprietorship.
Wages
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An LLC member cannot pay himself a wage as if he were an employee. He can only take his share of the profits.
Taxable Income
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Even if a member doesn't receive the profits in hand, it is still considered taxable income for that year.
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