An LLC protects owners like partners but taxes like corporations. It allows flexible ownership and management. Most new owners choose LLCs to benefit from disregarded entity tax status rather than corporations.
Flexibility and Management
LLCs offer flexibility in management structure and are often member-managed, meaning owners handle day-to-day operations.
Tax Advantages and Asset Protection
LLCs shield personal assets from legal judgments against the business. If sued, personal assets are protected. The operating agreement outlines everything. The main LLC advantage is limited liability protection for personal assets from debts and lawsuits. Most single member LLCs are disregarded entities, taxed like sole proprietorships, where no separate tax return is filed. Income and expenses are reported on the member’s individual return, which avoids the double taxation of C Corporations and simplifies filing.
Owners, called members, share profits and losses. An LLC can have one or multiple members. If judgments exceed business assets, members’ personal assets can’t cover shortfalls. Single member LLC taxes are simpler than those of multiple member LLCs.