It takes about as much effort to set up an LLC as it does to form a cor­po­ra­tion. You file papers with the state of Alaska, the state gives you arti­cles of orga­ni­za­tion which is like the LLC’s birth cer­tifi­cate, and the LLC is con­sid­ered a sep­a­rate per­son so long as you make an effort to keep it alive.

As a sep­a­rate per­son, the LLC can enter into con­tracts, own prop­erty, and do busi­ness. This means that your per­sonal assets such as your home, sav­ings, cars, etc. are pro­tected from the LLC’s acts, the acts of your employ­ees, and the acts of the other own­ers of the LLC.

But unlike cor­po­ra­tions, LLC’s are not sub­ject to dou­ble tax­a­tion. They can be taxed as a sole pro­pri­etor­ship, part­ner­ship, S Cor­po­ra­tion, or C Cor­po­ra­tion. LLC’s also don’t require for­mal­i­ties and pro­vide you with some­thing called a charg­ing order pro­tec­tion. There’s almost no down­side to LLCs other than main­tain­ing good stand­ing with the state of Alaska and fol­low­ing its oper­at­ing agreement.

Gen­er­ally if you’re a small busi­ness and have a part­ner, sign con­tracts, have employ­ees, or have valu­able busi­ness assets, then you should form an LLC. As men­tioned before, it’s the cheap­est insur­ance you can buy.