A limited liability company (LLC) protects personal assets and prevents double taxation since owners are not personally liable for company debts and obligations. However, forming and maintaining an LLC can be expensive and complex.
Cost and Maintenance
- Expensive to form and maintain
- State filing fee: $40-$500
- Option to self-form or use a service
Legal and Operational Challenges
- Potential disputes between members
- Differing ideas on operations or profit distribution can cause conflict
Tax Complexity
- Members have the option to choose the LLC’s tax status
- Possibility of double taxation at corporate and personal levels
- Members owe self-employment tax
LLCs provide a blend of liability protection and tax benefits but come with their own set of risks.
Liability Limitations and Taxation Risks
- May not offer the same level of liability protection as a corporation
- Taxation rules can be complex and might lead to double taxation
Regulatory Requirements
- States have specific rules and regulations governing LLCs
- Not all organizations qualify to be an LLC