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How forming an LLC can be beneficial for NJ business owners

At some point, many New Jersey residents may have dreamed of owning their own business. Though it may sound simple enough, business planning can actually be very complex, and failing to do it properly can result in serious financial issues. Therefore, it may be in a business owner's best interests to consider all business structure options and discuss each of them with an attorney.

One area where business formation can be complicated is when considering tax implications. For example, though all business types can enjoy deductions related to employee benefits, only C corporations can deduct benefits paid to an owner or a shareholder. Though this may seem minor, such expenses can add up over time. Therefore, depending on the circumstances, establishing a business as a C corporation may be beneficial.

There are other advantages to creating a limited liability entity. For one thing, business owners can separate their personal finances from company debt. This means that if the company fails its debt obligations, creditors cannot seek to recover from the business owner personally. It is important, though, to recognize that many creditors seek a personal guarantee for business debt, so lending agreements should be closely scrutinized before being signed.

Business formation can be stressful. There are business, personal, and legal issues to address, and sometimes there may be conflicts within each area. However, with proper planning, a business owner can limit his or her potential liability, reduce tax obligations, and ensure he or she starts off on the right footing to create a business geared for success. An attorney can be a powerful ally in this process, and can be there to handle initial formation issues, lease agreements, and to negotiate business disputes.

Source: Fox Business, "The Tax Implications for Forming a LLC," Bonnie Lee, June 13, 2014

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