Limited Liability Companies are a Great Business Structure

Simply said, a limited liability company, commonly know as an LLC, is a cross between a standard corporation and a general partnership. With an LLC, you get many of the benefits enjoyed by a corporation without the need for most of the corporate formalities. As such, it is a perfect fit for most small businesses.

For tax purposes, the owners, or members, of an LLC get treated just like a partnership. This means that taxes pass right through the LLC and are paid by the members. Where in a corporation, both the company itself and its employees pay 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, an LLC still pays any payroll taxes required by the federal and state governments.

You choose the tax treatment you desire when you set up your LLC. You can be taxed as a C corporation, an S corporation, or treated like a sole proprietor. With an LLC, the decision is yours to make.

Certain personal liability protection is afforded the members of a properly set up LLC, but business and personal activity must be keep completely separate for this to happen. This liability protection is one of the reasons people choose an LLC over sole proprietorship. Also, as an LLC a company usually earns more respect in the customer’s eyes.

When the formation paperwork is drawn up for a limited liability company, the person doing the work does not have to be a member of the LLC. This allows the company owners to use one of the several very reputable online formation services. This also ensures that your LLC is properly set up so there will not be any issues down the road.

With an LLC, the limited of an individual member’s liability is determined by the financial contribution they make to the LLC. You can have multiple partners with an LLC. These partners can either be active in the business or be silent partners/investors.

An LLC gives its owners greater flexibility than a corporate structure would, but at the same time it is very similar to a corporate structure. A small business with a limited number of owners would be a perfect candidate for the LLC structure.

The LLC is a relatively new form of business entity, at least in the United States. As a matter of fact, as early as 1986, LLCs were only allowed in two states. Now, every state recognizes this business structure.