Overview of an LLC
An LLC protects owners like partners but taxes like corporations. It allows flexible ownership and management. The operating agreement outlines everything. The main LLC advantage is limited liability protection for personal assets from debts and lawsuits. If judgments exceed business assets, members’ personal assets can’t cover shortfalls. Most new owners choose LLCs to benefit from disregarded entity tax status rather than corporations.
Taxation and Management Structure
LLCs allow flexibility in management structure. Many are member-managed – owners handle day-to-day operations. Most single member LLCs are disregarded entities, taxed like sole proprietorships. No separate tax return is filed. Income and expenses are reported on the member’s individual return. This avoids double taxation of C Corporations and simplifies filing. Owners, called members, share profits and losses. An LLC can have one or multiple members.
Hierarchy in an LLC
The structure of an LLC contains owner members who may also govern the business. An LLC needs a general director, chief accountant, and a management body for business decisions. Small LLCs may only need a few individuals in these roles, while larger LLCs require many. Other LLCs are run by managers, rather than being member-managed.