A limited liability company, or LLC, can be best considered to be a mixture of a corporation and a partnership. To put it simply, an LLC offers many of the benefits of a corporation without all of the formalities usually associated with a corporation.

The owners of an LLC, who are called member, are treated like a partnership for tax purposes. The LLC passes through income taxes directly to its members, so the LLC never pays income taxes itself, unlike a corporation.

An LLC does not suffer from the double-taxation issue that a corporation faces. To simplify this, due to the fact that the tax burden is passed on directly to the owners, income tax is paid just one time. Though, an LLC is still obligated to pay state (if applicable) and federal payroll taxes.

At the time of form LLC, a decision is made about how you choose the tax treatment desired. You can be taxed like 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.

If the LLC is set up correctly, and personal and business activities are kept completely separate, 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. You should also consider that a company generally earns more respect when it has a formal business structure, such as an LLC.

LLC formation is performed by someone who does not necessarily need to be a member. You can actually use an online company to form your LLC for a very reasonable cost, which means you are assured that the structure is set up correctly.

Typically, a member’s financial liability is limited to the amount of money contributed by that member. When you are operating as an LLC, you can bring in multiple partners, who can be active 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 online incorporation service company works best a smaller business in which there doesn’t have to be too many owners.

The LLC is a fairly new type of business structure, at least in the United States. As early as 1986, LLCs were only allowed in two states. Today, the limited liability company is recognized in every state.

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