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Limited Liability Companies (LLCs)
- Limited liability companies legally enjoy the same limited liability advantages as corporations. LLCs also provide tax benefits that some corporations don’t. Both LLCs and corporations shield their owners from liability for the entity’s actions.
- Between 2005-2014, domestic LLCs increased 66%. LLCs have no limit on members allowed. Profits and losses pass through to owners’ returns. Owners pay tax on their share of profits/losses. This avoids double taxation.
Taxation Structure of LLCs
- An LLC is easy for tax purposes. Unless you select otherwise, profits are taxed like a sole proprietorship. Business profit counts as your income. You prepare a personal tax return. With over one member, you prepare a partnership return. Profits pass through to members like a partnership.
Benefits and Popularity of LLCs
- First, an LLC limits owners’ liability. Your personal/family assets separate from business assets. This protects you if the business fails. Forming an LLC also isn’t too hard.
- LLCs provide liability protection like a corporation without the formalities. An LLC aims to produce benefits like liability protection, good taxes, flexibility in ownership, and fewer legal issues.
- Thousands of LLCs are created daily as more people select this balanced, flexible structure. However, LLCs aren’t for everyone. Some people should incorporate, while some could use a sole proprietorship. How do you decide the right entity? I’ll explain the LLC’s popularity and if it fits your venture.
