A limited liability company (LLC) protects personal assets. If the business has issues, your personal assets are safe. For tax purposes, the IRS treats an LLC as a pass-through entity. LLC owners are not personally liable for company debts. Setting up an LLC shields assets from business debts and lawsuits. However, LLCs can be expensive to form and maintain. Another LLC downside is taxation complexity. Profits can be taxed at corporate and personal levels. Members also owe self-employment tax.
States regulate LLCs. You can form one yourself or use a service. If an LLC has multiple owners, it’s taxed like a partnership. LLCs prevent double taxation and limit liability. But disputes between members are possible. The main LLC cost is the state filing fee. Corporations limit liability; partnerships enable pass-through taxation. LLCs are hybrids, with flexibility. Owners choose tax status but may face double taxation.
This means LLCs don’t pay taxes on business income. Instead, income and expenses go directly on the member’s tax return. Members manage LLCs jointly.
What taxes does an LLC pay in Pennsylvania?
What is an LLC usually taxed as?