A limited liability company, or LLC, is easiest considered to be a composition of a partnership and a corporation. Simply explained, an LLC gives you the best parts of a corporate structure but not all of the corporate formalities.

The owners of an LLC, who are called member, are looked upon as a partnership for tax purposes. It is a pass-thru tax structure, so income taxes are paid by its owners, so the LLC never pays income taxes itself, unlike a corporation.

An LLC never worries about the double-taxation issue that a corporate structure faces. To simplify this, due to the fact that the tax obligation is passed on directly to the owners, income is only taxed once. However, an LLC is still obligated to pay state (if applicable) and federal payroll taxes.

At the time of form LLC, you choose how to handle income taxes. You have the choice to handle income taxes as if you were 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 happenings are kept completely separate, the members can look forward to certain 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 structure, such as a limited liability company.

LLC formation is done by someone who does not necessarily need to be an owner. You can actually use an online company to create your LLC for a very reasonable charge, which means you are assured that the structure is properly set up.

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 either be actively involved in the company, or just contribute money.

While an LLC is similar in structure to a corporation, it offers more flexibility to its owners. Forming an LLC with an incorporate your business online company works best smaller companies in which the number of owners is limited.

The limited liability company is a relatively new type of business structure, at least in the US. As early as 1986, you could create a limited liability company in only two states. Today, you can form an LLC in every state.

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