Benefits of Forming An LLC
The most popular forms of business among most entrepreneurs are sole proprietorships, partnerships and corporations. There is another interesting form of business. This is the Limited Liability Company. There are businesses which would actually do better with an LLC as their business form rather than any other common structure. A key point about the LLC is the fact that it has features of both a partnership and a corporation. This is something useful but regularly ignored. It makes it easier to operate a business at low tax rates. Below are some advantages of the LLC structure.
The first advantage of an LLC is the limited liability it offers. The owners under this structure are referred to as members. The liability protection that LLC offers is in a way that each member is able to operate as a separate entity. The members are therefore not held responsible at a personal level for any debts or decisions that the company makes unless personal guarantees had been made. A good instance would be if the company runs bankrupt no member shall be held responsible by clients or suppliers on a personal level. As a member within an LLC you do not have the personal responsibility of paying of company debts with your own means even if you can afford to do so.
One advantage that any business owner would relish is the LLC tax feature. Unlike all other corporations, the LLC is not exclusively liable to corporate tax. The pass capability allows LLCs the decision not to pay corporate tax. Members are hereby required to pose the taxes with their returns as profits are shared to the members. The members have freedom in the tax plan they choose to adopt. The members can still choose corporate tax if they please and if they think it favors the way their business operates.
LLCs have freedom of distribution company profits and the losses as well in any way possible. This is different from a partnership where the distribution of profits and losses is done based on the percentage of ownership or investment. With LLCs any agreed upon method would work. This business form also has few requirements for startup. The LLC method can be used by a group of members or by a single entrepreneur since there are different types of LLCs that you can form.
An LLC does not have a limitation to the number of members it can accommodate. The tax benefits of the LLC are stronger than other business entities. With the different tax climates, an LLC will offer you range of choice on how to file your return the best way.