Consider Forming an LLC is You Operate a Business
A limited liability company, or LLC, is easiest considered to be a hybrid between a partnership and a corporation. Simply explained, limited liability company gives you the good parts of a corporate structure 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 is a pass-thru tax structure, so income taxes are paid by its member, so, unlike a corporation, the LLC itself never pays taxes.
Because of this, an LLC does not suffer from the double-taxation problem that a corporate structure does. In other words, due to the fact that the tax liability is passed on directly to the owners, income is only taxed once. However, 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 you choose the tax treatment desired. You can handle income taxes as if you were a sole proprietor, a C corporation, or an S corporation. The choice is yours.
If the LLC is set up correctly, and you completely separate business and personal happenings, the members can look forward to certain personal liability protection. This potential protection is one of the biggest reasons to form an LLC versus running a business as a sole proprietor. Also, a company generally earns more admiration when it has a formal business structure, such as an LLC.
LLC form is done by a person who does not necessarily have to be an owner. There are actually several very good online companies that will form your LLC for a very reasonable charge, which means you are assured that everything is set up correctly.
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 company, or serve as silent investors.
An LLC is a business structure that is very very much like a corporation, but allows more flexibility to its members. Starting an LLC with an online incorporation services company works best a smaller business in which the number of owners is limited.
The LLC is a relatively new form of business entity, at least in the United States. As a matter of fact, as early as 1986, you could form a limited liability company in only two states. Now, the limited liability company is recognized in every state.
