Consider Forming an LLC is You Operate a Business
The business organization know as an LLC is easiest described as being a hybrid between a corporation and a partnership. To put it simply, an LLC gives you many of the benefits of a corporate structure but not all of the corporate protocols.
The multiple owners, called members, of an LLC are looked upon as a partnership when it comes to taxes. It passes through income taxes directly to its members, so the LLC never pays income taxes itself, unlike a corporation.
Because of this, an LLC never worries about the double-taxation issue that a corporate structure faces. In other words, because the tax burden is passed on directly to the owners, any income is only taxed once. Though, a limited liability company must still pay state (assuming there is any) and federal payroll taxes.
At the time of forming LLC, you choose how you choose the tax treatment desired. You have the choice to 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.
If the LLC is set up correctly, and personal and business activities are completely separated, the owners 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 business structure, such as a limited liability company.
LLC form is performed by a person who does not necessarily have to be an owner. You can actually use an online company to form your LLC for a very nominal cost, saving you from having to ensure the structure is set up correctly.
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 more than one 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 allows more flexibility to its owners. Creating an LLC with an online incorporation services company works best smaller companies in which the number of owners is limited.
The LLC is a fairly new type of business entity, at least in the US. As early as 1986, limited liability companies were only allowed in two states. Now, you can form an LLC in every state.
