An LLC protects owners with limited liability and allows flexible ownership and management. Members share profits and losses, and the operating agreement outlines everything.
Main Advantages of an LLC
Limited Liability Protection
The primary advantage is the limited liability protection it offers. If the business is sued and judgments exceed the business assets, members’ personal assets are protected and cannot be used to cover shortfalls.
Tax Benefits and Management Flexibility
LLCs benefit from disregarded entity tax status, avoiding double taxation like that of C Corporations. Most new owners choose LLCs for these tax benefits over corporations. They allow flexibility in management structure, with many being member-managed.
Simplified Taxes for Single Member LLCs
For single-member LLCs, taxes are simpler. Most are disregarded entities, taxed like sole proprietorships. Income and expenses are reported on the member’s individual return, which means no separate tax return is filed and filing is simplified.