May
15
The business structure know as a limited liability company, or LLC, can be best considered to be a composition of a partnership and a corporation. Simply explained, limited liability company offers the best parts of a corporation without all of the corporate formalities.
The owners of an LLC, who are called member, are treated like a partnership when it comes to taxes. The LLC passes through taxes on income directly to its owners, so the LLC never pays income taxes itself, unlike a corporation.
An LLC does not suffer from the double-taxation problem that a corporate structure faces. In other words, due to the fact that the tax obligation is put on only the owners, any income is only taxed once. However, a limited liability company must still pay state (assuming there is any) and federal payroll taxes.
At the time of LLC form, 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.
Assuming that the LLC is properly set up, and you completely separate business and personal activities, the members are afforded personal liability protection. This is a big reason why people choose to form an LLC versus operating as a sole proprietor. Also, a company generally earns more admiration when it has a formal business structure, such as an LLC.
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 create your LLC for a very reasonable cost, saving you from having to ensure the structure is properly set up.
A member’s financial 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 either be actively involved in the business, or serve as silent investors.
While an LLC is similar in structure to a corporation, it allows its owners more flexibility. Creating an LLC with an LLC online company works best a smaller business in which the number of owners is limited.
The LLC is a relatively new type of business structure, at least in the United States. As early as 1986, limited liability companies were only allowed in two states. Today, you can form an LLC in every state.
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