Forming an LLC May Be a Wise Choice For Your Small Business

The business formation know as an LLC is easiest described as being a composition of a partnership and a corporation. Simply explained, an LLC give a business many of the benefits of a corporation but not all of the formalities usually associated with a corporation.

The multiple owners, called members, of an LLC are treated like 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.

An LLC never worries about the double-taxation problem that a corporation faces. To simplify this, due to the fact that the tax burden is passed on directly to the owners, any income is only taxed once. Though, a limited liability company must still pay state (assuming there is any) and federal payroll taxes.

At the time of LLC incorporation, 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.

If the LLC is properly set up, and personal and business happenings are completely separated, the members can look forward to certain personal liability protection. This is a big reason why people choose to form an LLC instead of running a business as a sole proprietor. You should also consider that a company generally earns more admiration when it has a formal business structure, such as a limited liability company.

Forming an LLC is performed by a person who does not necessarily have to be an owner. You can actually use an online company to create your LLC for a very reasonable charge, saving you from having to ensure everything is set up correctly.

A member’s financial liability is limited to the amount of money contributed by that member. When you are operating as an LLC, you can bring in more than one partners, who can either be actively involved in the business, or just contribute money.

An LLC is a business organization, or business structure, that is very very much like a corporation, but allows more flexibility to its members. Starting an LLC works best a smaller business in which the number of owners is limited.

In the US, the LLC is a relatively new business structure. As a matter of fact, as early as 1986, LLCs were only allowed in two states. Now, the limited liability company is recognized in every state.