Creating an LLC is a Viable Option for Most Entrepreneurs
A limited liability company, or LLC, is easiest described as being a composition of a corporation and a partnership. Simply explained, limited liability company give a business the good parts of a corporation but not all of the protocols usually associated with a corporation.
The owners of an LLC, who are called member, get treated like a partnership when it comes to taxes. 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 does not suffer from the double-taxation problem that a corporate structure faces. In other words, because the tax burden is put on only the owners, income tax is paid just one time. However, a limited liability company must still pay state (if applicable) and federal payroll taxes.
At the time of form a LLC, you choose how to handle income taxes. You can be taxed like 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.
If the LLC is properly set up, and you completely separate business and personal activities, the members are afforded personal liability protection. This potential protection is one of the biggest reasons to form an LLC versus running a business as a sole proprietor. You should also consider that a business generally earns more reverence when it has a formal business structure, such as a limited liability company.
Forming an 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.
A member’s monetary liability is limited to the financial contribution made by that member. When you are operating as an LLC, you can bring in multiple partners, who can either be actively involved in the company, or serve as silent investors.
While an LLC is similar in structure to a corporation, it offers more flexibility to its members. Creating an LLC with an incorporating 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 form of business structure, at least in the US. As early as 1986, LLCs were only permitted in two states. Now, the LLC is recognized in every state.
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