A limited liability company, more commonly known as an LLC, is a legal entity that provides its owners with the limited liability protection of a corporation and the pass-through tax advantages of a sole proprietorship or partnership. LLCs are United States specific and are created and governed by state law.
Benefits of LLCs
LLCs have a multitude of benefits, which include the following:
Separate legal entity with limited liability. Limited liability means that the LLCs owners (called members) typically are not personally liable for the debts and liabilities of the LLC.
LLCs are simpler to form and more flexible then corporations. There are many forms of LLCs (see, Types of LLCs). LLC’s allow anyone to be members, including other corporate entities, and there aren’t any residency or citizenship restrictions. LLCs don’t have a minimum member requirement nor a cap. Many LLCs have only one member, while others have numerous.
LLCs don’t have the same compliance and strict formality requirements as corporations which allows the members more flexibility in operating the LLC.
LLCs allow the members to choose how net income/profits are allocated. Net income/profits may be allocated to members in different proportions to their ownership percentage.
LLCs provide tax advantages. An LLC has the option as being taxed as a partnership/sole proprietorship or as an S-Corp or C-corp. Providing the ease and financial savings of pass-through income taxation.
Is an LLC right for my business?
Due to the ease of formation, less stringent formalities, and flexibility of taxation, LLCs are often the entity of choice among new business owners. To determine whether an LLC is the right entity for your business, please contact O’Neill Tran Law today for a free consultation.