An LLC is a Great Business Structure For Most Small Companies
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. To put it simply, limited liability company offers the good parts 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 for tax purposes. The LLC is a pass-thru tax structure, so income taxes are paid by its member, so, unlike a corporation, the LLC itself never pays taxes.
Because of this, an LLC never worries about the double-taxation issue that a corporation faces. To simplify this, due to the fact that the tax burden is passed on directly to the owners, income tax is paid just one time. Though, a limited liability company is still obligated to pay state (assuming there is any) and federal payroll taxes.
At the time of forming LLC, you choose how to handle income taxes. You can be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.
Assuming that the LLC is properly set up, and personal and business happenings are completely separated, the owners can look forward to certain personal liability protection. This potential protection is one of the biggest reasons to form an LLC instead of running a business as a sole proprietor. Also, a business generally earns more reverence when it has a formal structure, such as an LLC.
Form a LLC is done by a person who does not necessarily have to be an owner. There are actually several very good online companies that will form your LLC for a very reasonable cost, which means you are assured that the structure is properly set up.
A member’s monetary liability is limited to the amount of money contributed by that member. When you are operating as a limited liability company, you can bring in multiple partners, who can be active in the company, or just contribute money.
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 online incorporation company is most suitable for smaller companies in which the number of owners is limited.
In the United States, the LLC is a relatively new business entity. As early as 1986, limited liability companies were only allowed in two states. Today, the limited liability company is recognized in every state.
