A limited liability company, or LLC, can be best described as being a composition of a corporation and a partnership. To put it simply, an LLC offers many of the benefits of a corporate structure without all of the formalities usually associated with a corporation.
The owners of an LLC, who are called member, are looked upon as a partnership when it comes to taxes. The LLC is a pass-thru tax structure, so income taxes are paid by its member, so the LLC never pays income taxes itself, unlike a corporation.
An LLC does not suffer from the double-taxation problem that a corporation does. In other words, because the tax burden is put on only the owners, any income is only taxed once. However, a limited liability company must still pay state (if applicable) and federal payroll taxes.
At the time of form LLC, you choose how you choose the tax treatment desired. You can handle income taxes as if you were a sole proprietor, a C corporation, or an S corporation. The great thing about a limited liability company is that you get to decide how to handle paying taxes.
Assuming that the LLC is properly set up, and personal and business activities are completely separated, the members are afforded personal liability protection. This is a big reason why people choose to form an LLC versus running a business as a sole proprietor. Also, a business earns more respect when it has a formal structure, such as an LLC.
Form a LLC is done by someone who does not necessarily have to be a member. You can actually use an online company to form your LLC for a very nominal charge, which means you are assured that the structure is properly set up.
Typically, a member’s monetary liability is limited to the financial contribution made by that member. When you are operating as an LLC, you can bring in multiple partners, who can be active in the company, or just contribute money.
An LLC is a business structure that is very similar to a corporation, but allows its owners more flexibility. Creating an LLC with an incorporate business online company works best smaller companies in which the number of owners is limited.
In the US, the LLC is a fairly new business entity. As early as 1986, you could form a limited liability company in only two states. Now, every state recognizes this business structure.
