An LLC, or limited liability company, can be considered to be a marriage between a corporation and a partnership. Basically, with an LLC you get many of the same benefits that a corporation enjoys, without the majority of the formalities that come with a corporation.
The multiple owners, called members, of an LLC get treated like a partnership for tax purposes. It passes through taxes on income directly to its members, so, unlike a corporation, the LLC itself never pays taxes.
Income from an LLC is taxed only once because it passes straight through the business, onto the owners. Therefore, an LLC does not suffer from the double-taxation issue that a corporation deals with. But, an LLC still pays any payroll taxes required by the federal and state governments.
When you set up an LLC, you choose how you choose the tax treatment desired. You can be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.
Assuming that the LLC is set up correctly, and personal and business activities are completely separated, the members are afforded personal liability protection. This is one of the biggest reasons to form an LLC versus operating as a sole proprietor. Also, a business earns more respect when it has a formal structure, such as an LLC.
When the formation paperwork is drawn up for a limited liability company, the person doing the work does not have to be a member of the LLC. This allows the company owners to use one of the several very reputable online formation services. This also ensures that your LLC is properly set up so there will not be any issues down the road.
A members liability is limited to the financial contribution made by that member. And an LLCs structure allows you to bring in multiple partners, who can either be actively involved in the business, or serve as silent investors.
A limited liability company is a business organization, or business structure, that is very similar to a corporation, but offers more flexibility to its owners. It is a structure that is suitable for smaller companies in which the number of owners is limited.
The limited liability company is a fairly newly created business structure in the United States. Just a little over twenty years ago the LLC was recognized by only two states. Now days, every state allows you to form an LLC.
