What is an LLC?
LLC stands for Limited Liability Company. Basically, an LLC is the simplest business structure that provides protection (Limited Liability) to its owners’ personal assets in the case of a lawsuit. One of the LLC’s signature assets is the benefit of Pass-through taxation. That is, the company is not required to file a corporate tax return, the company’s income is instead treated as the owners’ income and is individually reported through their own personal tax filings. Thus, an LLC should not only protect owners from double taxation, but should also provide owners protection from personal liability for business debts and claims. In other words, if your Limited Liability Company is facing a lawsuit, only the assets of the business should be at risk, usually keeping the personal assets of LLC owners out of reach.
Although forming an LLC may be an attractive option for many businesses, a Limited Liability Company may restrict the potential of growth because of its inability to incorporate or issue shares to its stockholders. An LLC may also be treated differently from state to state and offers a variety of tax options not mentioned in this article. Therefore, before deciding which business structure best fits the needs for your company’s short and long term goals, it is recommended to carefully weigh out all your options with a qualified business attorney.
This might be stepping too far in the future, but if you decide to have open an LLC we suggest looking at our article about the filing costs and other factors here. If you want a partnership LLC, we highly suggest you look at creating an operating agreement. To find out more click here.
To give you one piece of advise, we also suggest that you have a lawyer as a registered agent if you are planning to open up an LLC. To learn more about why you should read our article here.
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