Limited Liability Company

A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Additionally, LLCs are more like partnerships; they offer management flexibility and also pass-through taxation, a practice seen as a major benefit by most business owners.

There are many reasons why business owners choose to designate their company as a Limited Liability Company (LLC).  There are many advantages in doing this.  The main advantages include the following:

1.  The owners of the business, known as members in an LLC situation, can only be held liable limitedly.  They are protected from being held liable for the debts and acts of the LLC. 

2.  An LLC is able to be set up with just one person involved or, in some states, one owner which may make up the entire entity.

3.  Taxation occurs according to a method known as pass-through taxation.  This means that a business owner’s profits are taxed at the member level, not the limited liability company level.  This can mean a great deal of tax savings for business owners and more money for them to but into their businesses to improve their product line, productivity, efficiency, etc.  Businesses have no risk of being double taxed when they are identified as an LLC. 

4.  LLCs are enduring legal business entities, with agreements in place that extend beyond the lifespan of their owners, because of this, problems are avoided such as  business termination due to a wide array of problematic situations or the death of a sole proprietor, if that is how the business is set up.

5. Within LLCs, membership interests can be assigned.  Along with that, the economic benefits of those interests can be separated and assigned.

6.  Overall, LLCs require a great deal less record keeping and paperwork than do other types of business structures.

When opening a business, it’s very important to explore several different business structures to determine what is right for the business venture you have in mind.  An LLC (Limited Liability Company) can offer many significant advantages, however it may not be the best option for all businesses.  It is important to also find out what the disadvantages are to this type of business set-up.  There are also certain types of businesses that are not allowed to become LLCs such as insurance companies and banks so it’s very important to be familiar with particular state laws and federal guidelines that regulate LLCs.