Benefits of Forming An LLC
Many business owners prefer registering their companies as either sole proprietorships, corporations or partnerships. There is another interesting form of business. 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 something useful but regularly ignored. It makes it easier to operate a business at low tax rates. The following are some of the benefits of an LLC.
The first advantage of an LLC is the limited liability it offers. All business owners within an LLC are referred to as members. Every member with the LLC is able to operate separately as a provision of the liability within an LLC. If the company has any debts, members are not help responsible at a personal level unless they made personal agreements to that. In the event that the company runs broke, no member shall be held personally responsible for debts facing the company. 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 entitled to the profits as well as the losses of the company but they are obligated to post this figures in their respective tax returns. 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.
An LLC has a highly flexible capability of distributing profits to its members. In partnerships, distribution is only limited to the percentage of investment or ownership by every member. With an LLC, members agree on whatever formula they choose to split the profits or losses. An LLC does not have many requirements for startup. The LLC company structure can be adopted by an individual entrepreneur as well as a group of businessmen since there are many different types of LLCs you can form depending on the number of participants.
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.