A limited liability company, or LLC, can be best described as being a mixture of a corporation and a partnership. Simply explained, an LLC gives you many of the benefits of a corporate structure without all of the protocols usually associated with a corporation.
The owners of an LLC, who are called member, get looked upon as a partnership for tax purposes. It is a pass-thru tax structure, so income taxes are paid by its owners, so, unlike a corporation, the LLC itself never pays taxes.
Because of this, an LLC never worries about the double-taxation problem that a corporation does. In other words, due to the fact that the tax obligation is passed on directly to the owners, any income is only taxed once. However, an LLC is still obligated to pay state (assuming there is any) and federal payroll taxes.
At the time of form a LLC, a decision is made about how you choose the tax treatment desired. You have the choice to handle income taxes as if you were 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.
Assuming that the LLC is properly set up, and you completely separate business and personal happenings, the members are afforded personal liability protection. This potential protection is a big reason why people choose to form an LLC instead of running a business as a sole proprietor. Also, a business generally earns more admiration when it has a formal business structure, such as a limited liability company.
Form a LLC is done by a person who does not necessarily have to be a member. You can actually use an online company to create your LLC for a very reasonable cost, saving you from having to ensure 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 a limited liability company, you can bring in multiple partners, who can either be actively involved in the business, or serve as silent investors.
While a limited liability company is similar in structure to a corporation, it allows member more flexibility. Forming an LLC with an LLC online company is most suitable for smaller companies in which there doesn’t have to be too many owners.
The LLC is a fairly new type of business entity, at least in the US. As early as 1986, you could create a limited liability company in only two states. Now, you can form an LLC in every state.
