LLC Formation is a Great Idea Under Most Circumstances
The business organization know as an LLC can be best described as being a composition of a partnership and a corporation. To put it simply, an LLC offers the best parts of a corporate structure but not all of the protocols usually associated with a corporation.
The multiple owners, called members, of an LLC get treated like a partnership when it comes to taxes. The LLC passes through taxes on income directly to its owners, so, unlike a corporation, the LLC itself never pays taxes.
Because of this, an LLC does not suffer from the double-taxation issue that a corporate structure faces. In other words, because the tax liability is put on only the owners, income is only taxed once. However, an LLC must still pay state (if applicable) and federal payroll taxes.
At the time of LLC form, a decision is made about 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.
Assuming that the LLC is properly set up, and you completely separate business and personal activities, the owners can look forward to certain personal liability protection. This is one of the biggest reasons to form an LLC versus running a business as a sole proprietor. You should also consider that a company earns more respect when it has a formal business structure, such as an LLC.
Forming LLC is done by a person who does not necessarily have to be a member. There are actually several very reputable online companies that will create your LLC for a very reasonable charge, which means you are assured that the structure is set up correctly.
Typically, a member’s monetary 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 owners. Forming an LLC with an online incorporation services 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 early as 1986, limited liability companies were only allowed in two states. Today, every state recognizes this business structure.
