Benefits of Forming An LLC
Sole proprietorships, partnerships and corporations are the most preferred business forms for many business owners. There is another interesting form of business. This is the Limited Liability Company. Most business owners settle for other forms of business such as partnerships when the most ideal structure for them would be a limited liability company. A key point about the LLC is the fact that it has features of both a partnership and a corporation. This allows you to get the advantages of the two forms of business. 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. All business owners within an LLC are referred to as members. Each member enjoys the liability protection it offers being able to operate as a separate entity. If the company has any debts, members are not help responsible at a personal level unless they made personal agreements to that. Even if the company runs bankrupt no single member will face a lawsuit at 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.
The tax models available with this business structure are very attractive. An LLC is not liable to corporate tax unlike all other corporations. LLCs have the pass capability that allows this. 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 corporate tax option is also viable for LLC members should they choose so and think that their business will have an advantage this way.
An LLC has a highly flexible capability of distributing profits to its members. This is different from a partnership where the distribution of profits and losses is done based on the percentage of ownership or investment. However, LLCs offer members full control of their revenue distribution. There are just a few requirements to start an LLC, nothing different from other business structures. 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.
Another great advantage of the LLC is the unlimited number of members that can form a single Limited Liability Company. The tax benefits of an LLC are much better compared to other forms. An LLC allows an entrepreneur to fully control their finances by changing the tax methods they are exposed to by registering as either a corporate or as a sole proprietor.