A limited liability company, or LLC, is easiest considered to be a mixture of a partnership and a corporation. To put it simply, limited liability company gives you many of the benefits of a corporation but not all of the protocols usually associated with a corporation.

The multiple owners, called members, of an LLC are looked upon as 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 does. In other words, because the tax burden is put on only the owners, income tax is paid just one time. Though, a limited liability company must still pay state (assuming there is any) and federal payroll taxes.

At the time of LLC incorporation, 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.

If the LLC is set up correctly, and you completely separate business and personal activities, the owners are afforded personal liability protection. This potential protection is a big reason why people choose to form an LLC instead of operating as a sole proprietor. You should also consider that a company generally earns more admiration when it has a formal structure, such as an LLC.

LLC formation is performed by someone who does not necessarily have to be a member. There are actually several very good online companies that will create your LLC for a very reasonable charge, which means you are assured that everything is set up correctly.

Typically, 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 multiple partners, who can be active in the business, or serve as silent investors.

A limited liability company is a business organization, or business structure, that is very very much like a corporation, but allows its owners more flexibility. Starting an LLC works best a smaller business in which there doesn’t have to be too many owners.

In the United States, the LLC is a relatively new business structure. As early as 1986, LLCs were only allowed in two states. Today, you can form an LLC in every state.

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