The business structure know as a limited liability company, or LLC, is easiest considered to be a composition of a partnership and a corporation. Simply explained, an LLC offers many of the benefits of a corporation without all of the protocols usually associated with a corporation.
The owners of an LLC, who are called member, get looked upon as a partnership for tax purposes. It passes through taxes on income directly to its owners, so, unlike a corporation, the LLC itself never pays taxes.
An LLC never worries about the double-taxation issue that a corporation does. To simplify this, due to the fact that the tax burden is put on only the owners, income tax is paid just one time. Though, an LLC is still obligated to pay state (assuming there is any) and federal payroll taxes.
At the time of forming LLC, a decision is made about 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.
If the LLC is properly set up, and personal and business activities are completely separated, the owners can look forward to certain personal liability protection. This potential protection is a big reason why people choose to form an LLC instead of operating as a sole proprietor. You should also consider that a company generally earns more reverence when it has a formal structure, such as a limited liability company.
Form a LLC is done by a person who does not necessarily have to be a member. You can actually use an online company to form your LLC for a very nominal cost, which means you are assured that the structure is properly set up.
Typically, a member’s monetary liability is limited to the amount of money contributed by that member. And an LLC’s structure allows you to bring in multiple partners, who can be active in the company, or serve as silent investors.
While a limited liability company is similar in structure to a corporation, it offers more flexibility to its members. Creating an LLC with an incorporate business online company works best a smaller business in which there doesn’t have to be too many owners.
In the United States, the limited liability company is a relatively new business structure. As a matter of fact, as early as 1986, LLCs were only allowed in two states. Today, you can form an LLC in every state.
