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More Information About LLC
Form a Limited Liability Company
The limited liability company (LLC) offers limited liability protection and pass-through taxation. An LLC can be managed by either by the members or by managers (you decide).
The LLC allows for pass-through as its income is not taxed at the entity level; however, a tax return for the LLC must be completed. Any income or loss of the LLC as shown on this return is passed through to the owners. The owners, also called members, must then report the income or loss on their personal tax returns and pay any necessary tax.
As with corporations, the LLC legally exists as a separate entity from its owners. Therefore, the owners cannot typically beheld personally responsible for the debts and liabilities of the LLC.
Advantages of an LLC:
| 1. |
LLCs allow for pass-through taxation |
| 2. |
Members on an LLC are not typically held personally responsible for the debts and liabilities of the business. |
| 3. |
LLCs generally have no ownership restrictions |
| 4. |
LLC members have flexibility in structuring the management of the company |
| 5. |
An LLC does not require as much annual paperwork, or have as many formalities, as a C corporation or an S corporation. |
| 6. |
Written consent of LLC members must be obtained prior to increasing ownership in the company |
| 7. |
Potential customers may perceive an LLC as a more professional entity than a sole proprietorship or partnership |
To create an LLC, the proper formation documents, typically called the articles of incorporation or certificate of incorporation, must be filed with the appropriate state agency and the necessary state filing fees paid. |
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