Benefits of Forming An LLC
Many business owners prefer registering their companies as either sole proprietorships, corporations or partnerships. However, there is one particularly beneficial business structure. The limited liability company is a good yet often ignored business structure. There are many business forms that would best work with the Limited Liability structure but are set up as other forms of business. A key point about the LLC is the fact that it has features of both a partnership and a corporation. This is a very useful feature of the business form. It makes it easier to operate a business at low tax rates. Below are some advantages of the LLC structure.
A LLC offers a limited liability that stands out than other business forms. The business owners within this structure are called members. Each member enjoys the liability protection it offers being 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. 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. A Limited Liability Company is exempt from corporate tax unlike other corporates. The pass capability allows LLCs the decision not to pay corporate tax. The members will receive the profits and the losses of the company and in turn they are required to report this in their tax returns. The tax system the members choose to adopt is entirely on them. 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. An LLC does not have many requirements for startup. This business structure can be adopted by one member or many members.
Limited Liability Companies do not have personnel limitation on how many people it can accommodate. The tax benefits of an LLC are much better compared to other forms. With the different tax climates, an LLC will offer you range of choice on how to file your return the best way.