Why Crypto Companies Choose to Formulate as LLCs

Business leaders across all industries constantly face the unenviable task of deciding on what is the right call. Many new business leaders will likely find themselves second-guessing most of their decisions, which is not surprising at all considering how one wrong move can make or break a company. 

Amerisleep CEO Firas Kittaneh explains how these choices can set a precedent that can alter the future of a business. In certain cases, choosing the right path is extra difficult, as there is no clear right answer. This holds especially true in the vastly emerging field of cryptocurrency.

One of the earliest, most critical decisions a crypto company must make is to determine its business structure. Before anything else, however, let us get one thing straight: right from the start, you must establish your Bitcoin-powered venture as a formal legal entity — and we recommend a limited liability company (LLC). Doing so frees you from the burdens of being personally accountable and legally responsible of your company. In most instances, you can also enjoy certain tax benefits. Having said these, let us delve a little bit deeper on the two glaring advantages of an LLC and why crypto companies choose to operate as one.

Double Taxation Prevention

Many reading this article may be wondering: “why should my cryptocurrency business make the change to become an LLC when a sole proprietorship could suffice?” While this is a valid concern, particularly when it comes to the somewhat similar tax treatment of the two, there is no denying that an LLC provides a clear line between your personal interests and your business. 
LLCs in the United States, for one, enjoy the convenience of not having to submit two separate tax payments to the government. All you have to do is simply pay your business taxes through your individual tax returns. Ultimately, this avoids the dreaded double taxation, because you do not have to pay corporate and personal taxes on your income as corporate shareholders do.

Of course, tax requirements vary from state to state; country to country. 
LLCs in the Netherlands are a prime example of following noticeably different rules. For one, the European nation has relatively simpler reporting and lower share capital requirements compared to their US counterpart, but charges a slew of revenue streams like business, foreign source, and even passive income. With this, it is imperative you carefully probe your country’s or your state’s tax laws to make sure you are compliant.

Asset Protection

We mentioned earlier that establishing your cryptocurrency firm into an LLC effectively separates you from your business when it comes to taxes. Now let us discuss its benefits from a personal resources standpoint. 
Cryptocurrencies like Bitcoin are becoming increasing popular and widely used. But looking at the grand scheme of things, you have to also realize that it is still a sector that is developing. Governments around the world often have little to no laws and regulations with regards to trading cryptocurrency, which makes it all the more important to protect yourself in case a sudden change puts your business at risk.

By forming an LLC, your personal assets are shielded from any legal action you might find yourself caught up in as you strive to make a name in this highly volatile industry. Another good thing about this is that you still have the freedom to add shareholders—listing them as co-owners of your cryptocurrency firm altogether—and still have the power over day-to-day operations.

These two reasons perfectly highlight why choosing to become an LLC could be a step in the right direction for your crypto company. It offers the most protection for the least amount of effort, as well as setting you up to take a bigger leap in the future. Furthermore, having “LLC” in your crypto business name adds a touch of professionalism and validity, paving the way for potential customers and would-be business partners. To learn more about the wide world of cryptocurrencies, be sure to sign up and download
our free e-book ‘How to Buy Bitcoin’.

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