An LLC allows flexible ownership and management. The main LLC advantage is the limited liability protection for personal assets from debts and lawsuits. If judgments exceed business assets, members’ personal assets can’t cover shortfalls.
Taxation Advantages
Most new owners choose LLCs to benefit from disregarded entity tax status rather than corporations. Single-member LLCs are disregarded entities, taxed like sole proprietorships. Income and expenses are reported on the member’s individual tax return, which avoids the double taxation of C Corporations and simplifies filing.
LLCs allow flexibility in management structure. They are often member-managed, with owners handling day-to-day operations. The operating agreement outlines everything, detailing how owners, called members, share profits and losses. An LLC can have one or multiple members.
Member Protection
LLCs shield personal assets from legal judgments against the business. If sued, personal assets are protected, ensuring that if judgments exceed business assets, members’ personal assets can’t be used to cover shortfalls.
What is the role of a director in a limited liability company?
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