LLC Basics
An LLC, or Limited Liability Company, combines the liability protection of a corporation with the tax treatment and flexibility of a partnership. The owners are referred to as members, and the primary advantage of an LLC is that it shields the members’ personal assets from debts and lawsuits against the business. Most owners prefer LLCs over corporations for this reason as well as for tax benefits.
Management and Taxes in an LLC
The structure of an LLC is quite flexible. It can be managed by its members or by appointed managers. An operating agreement is a key document that outlines the management structure and other important details. In terms of taxation, most single-member LLCs are treated as disregarded entities, which means they do not file a separate tax return. Instead, income and expenses are reported on the member’s personal tax return, avoiding the double taxation faced by C Corporations.
LLC Leadership
The highest positions within an LLC depend on its management structure. Typically, LLCs are either member-managed, with each member participating in the day-to-day operations, or manager-managed, where either members or outside managers handle the operations. The specific roles, like a general director or chief accountant, are determined by the size and needs of the LLC and are established in the operating agreement. Small LLCs might only have a few members or managers, while larger ones may have a more complex hierarchy.