An LLC is a Great Business Structure For Most Small Companies

The business formation know as an LLC can be best described as being a hybrid between a corporation and a partnership. Simply explained, an LLC gives you the good parts of a corporation but not all of the formalities usually associated with a corporation.

The multiple owners, called members, of an LLC get looked upon as a partnership for tax purposes. It is a pass-thru tax structure, so income taxes are paid by its member, so, unlike a corporation, the LLC itself never pays income tax.

An LLC does not suffer from the double-taxation problem that a corporate structure faces. To simplify this, because the tax liability is passed on directly to the owners, any income is only taxed once. Though, a limited liability company is still obligated to pay state (if applicable) and federal payroll taxes.

At the time of LLC form, a decision is made about how to handle income taxes. You have the choice to be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.

Assuming that the LLC is properly set up, and personal and business activities are completely separated, the owners are afforded personal liability protection. This potential protection is one of the biggest reasons to form an LLC instead of running a business as a sole proprietor. You should also consider that a company generally earns more reverence when it has a formal structure, such as a limited liability company.

Form a LLC is performed by a person who does not necessarily need to be an owner. There are actually several very good online companies that will form your LLC for a very reasonable cost, saving you from having to ensure everything is properly set up.

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 more than one partners, who can either be actively involved in the company, or just contribute money.

While an LLC is similar in structure to a corporation, it offers more flexibility to its owners. Starting an LLC with an incorporate your business online company is most suitable for a smaller business in which the number of owners is limited.

The limited liability company is a fairly new form of business structure, at least in the US. As early as 1986, you could create an LLC in only two states. Today, you can form a limited liability company in every state.

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