A limited liability company, or LLC, can be best described as being a composition of a corporation and a partnership. To put it simply, an LLC give a business the best parts of a corporation without all of the protocols usually associated with a corporation.
The multiple owners, called members, of an LLC are treated like a partnership for tax purposes. It passes through income taxes directly to its members, so the LLC never pays income taxes itself, unlike a corporation.
An LLC never worries about the double-taxation problem that a corporation does. To simplify this, due to the fact that the tax liability is put on only the owners, income tax is paid just one time. Though, a limited liability company is still obligated to pay state (assuming there is any) and federal payroll taxes.
At the time of LLC formation, 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 great thing about a limited liability company is that you get to decide how to handle paying taxes.
Assuming that the LLC is properly set up, and personal and business activities are kept completely separate, the members are afforded personal liability protection. This potential protection is one of the biggest reasons to form an LLC versus operating as a sole proprietor. Also, a business earns more reverence when it has a formal business structure, such as an LLC.
Form a LLC is performed by someone who does not necessarily have to be an owner. You can actually use an online company to form your LLC for a very nominal cost, saving you from having to ensure everything is properly set up.
Typically, 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 business, or just contribute money.
While an LLC is similar in structure to a corporation, it allows member more flexibility. Creating an LLC with an incorporate your business online company is most suitable for a smaller business in which the number of owners is limited.
In the United States, the LLC is a relatively new business structure. As a matter of fact, as early as 1986, you could create a limited liability company in only two states. Now, you can form a limited liability company in every state.
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