An LLC, or limited liability company, can be considered to be a marriage between a corporation and a partnership. Basically, with an LLC you get many of the same benefits that a corporation enjoys, without the majority of the formalities that come with a corporation.
The multiple owners, called members, of an LLC get treated like a partnership for tax purposes. It passes through taxes on income directly to its members, so, unlike a corporation, the LLC itself never pays taxes.
Income from an LLC is taxed only once because it passes straight through the business, onto the owners. Therefore, an LLC does not suffer from the double-taxation issue that a corporation deals with. But, the business still pays any payroll taxes required by the federal and state governments.
The way that income taxes are paid by you, as a member of an LLC, is decided when you initially set up the structure. You choose between taxed as a C corporation, an S corporation, or as a sole proprietor. The beauty of an LLC is that you get to decide how you are going to be taxed.
The members of a limited liability company are afforded certain personal liability protection due to its structure, assuming it is set up right and all business and personal activities are properly separated. This is one of the biggest reasons why people choose this structure over being a sole proprietor.
The person that forms the limited liability company does not have to actually be a member of the LLC. You can have an online formation company do the work for you, thus ensuring that everything is set up properly.
With an LLC, the limited of an individual member's liability is determined by the financial contribution they make to the business entity. You can have multiple partners with this business structure. These partners can either be active in the business or be silent partners/investors.
While an LLC shares some similarities with a traditional corporation, it offers its owners greater flexibility. For businesses that have a limited number of owners, it is an ideal business structure.
The limited liability company is a fairly newly created business structure in the United States. Just a little over twenty years ago the LLC was recognized by only two states. Now days, every state allows you to form an LLC.
Caressa Waechter always has believed that a business needs a good structure, which is why she is a strong believer in forming an LLC. Visit her site to learn more about starting an LLC online: Forming an LLC
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