The business organization know as a limited liability company, or LLC, can be best described as being a hybrid between a corporation and a partnership. Simply explained, limited liability company give a business many of the benefits of a corporate structure but not 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. It passes through taxes on income directly to its owners, so the LLC never pays income taxes itself, unlike a corporation.
An LLC never worries about the double-taxation issue that a corporation does. To simplify this, because the tax liability is put on only the owners, income is only taxed once. However, an LLC is still obligated to pay state (assuming there is any) and federal payroll taxes.
At the time of LLC formation, you choose how you choose the tax treatment desired. You can be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.
If the LLC is set up correctly, and personal and business happenings are kept completely separate, the owners are afforded personal liability protection. This is one of the biggest reasons to form an LLC instead of operating as a sole proprietor. You should also consider that a company generally earns more respect when it has a formal structure, such as an LLC.
Forming LLC is done by someone who does not necessarily have to be an owner. You can actually use an online company to form your LLC for a very reasonable cost, which means you are assured that everything is set up correctly.
Typically, a member’s financial liability is limited to the financial contribution made by that member. When you are operating as an LLC, you can bring in more than one partners, who can be active in the company, or serve as silent investors.
A limited liability company is a business structure that is very very much like a corporation, but allows more flexibility to its members. Creating an LLC with an incorporate your business online company works best a smaller business in which there doesn’t have to be too many owners.
In the US, the LLC is a relatively new business structure. As a matter of fact, as early as 1986, you could create an LLC in only two states. Today, the LLC is recognized in every state.
