As an Entrepreneur, Starting an LLC is a Great Decision
A limited liability company, or LLC, is easiest considered to be a composition of a partnership and a corporation. Simply explained, limited liability company gives you the good parts of a corporation 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. 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 issue that a corporate structure does. In other words, because the tax obligation is passed on directly to the owners, income is only taxed once. Though, a limited liability company must still pay state (if applicable) and federal payroll taxes.
At the time of forming a LLC, a decision is made about how to handle income taxes. You can handle income taxes as if you were a sole proprietor, a C corporation, or an S corporation. The great thing about an LLC is that you get to decide how to handle paying taxes.
Assuming that the LLC is properly set up, and personal and business happenings are kept completely separate, 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. Also, a company earns more reverence when it has a formal business structure, such as a limited liability company.
LLC form is done by a person who does not necessarily need to be a member. You can actually use an online company to create your LLC for a very reasonable charge, which means you are assured that everything is properly set up.
Typically, a member’s monetary liability is limited to the financial contribution made by that member. And an LLC’s structure allows you to bring in more than one partners, who can be active in the business, or just contribute money.
While a limited liability company is similar in structure to a corporation, it offers member more flexibility. Starting an LLC with an online incorporation company works best a smaller business in which the number of owners is limited.
The limited liability company is a relatively new form of business entity, at least in the US. As a matter of fact, as early as 1986, you could form an LLC in only two states. Today, you can form an LLC in every state.
