Benefits of Forming an LLC
Copyright (c) 2010 Michael Jagoda
What is an LLC? LLC stands for Limited Liability Company. A Limited Liability Company is a legal business type that handles daily business activities like a sole proprietorship for single member LLCs or a partnership for multi-member LLCs. Forming an LLC provides personal limited liability protection for the owner(s) much like a corporation. However, since it is not a partnership or a corporation, owners are not called partners or share holders, they are known as ?members?.
LLCs can offer many benefits if you own a small business. They?re easy to form and for the most part there is not much paperwork involved in the initial LLC filing. Limited liabilty companies can provide personal asset protection for their members. In most states you can maintain the company?s good standing by filing an annual report and paying the state?s annual fee. Further, as long as you operate and maintain the LLC properly and follow your states compliance statutes your personal assets should be protected in the event that the LLC is ever sued!
LLCs provide additional benefits since they are a combination of partnerships and corporations. In doing this, an LLC is less formal and more flexible than a typical corporate setup but it also offers protection and even certain advantages that are the same as those of a corporation. For example, members of a properly operated and maintained LLC should not be held personally liable for company debts. Their assets are also separated from those of the LLC, so personal assets are afforded protection as well.
Another advantage of an LLC is that while they are traditionally taxed as a sole proprietorship or partnership, they can also elect to be taxed as a sub chapter s corporation. LLCs have what is known as pass-through taxation which differs from the double taxation associated with c corps. Members of an LLC will only be required to pay taxes on their earnings instead of paying both corporate and individual taxes on the same earnings
Unlike a sub chapter s corporation, which limits the number of share holders, there is no limit on the number of members an LLC can have. Also LLCs are not required to have bylaws, hold meetings or record minutes. However, it is a good practice for the members of an LLC to develop an operating agreement which outlines how the affairs of the business will be conducted.
Another great benefit if your form an LLC is the transferability of ownership interest. The company will survive even as changes are made to the membership of the LLC.
As an LLC, you also have more options available to raise capital. You can admit new members by selling membership interests. You can even create new classes of membership interests with different voting or profit sharing characteristics.
LLCs offer many advantages and benefits for small business owners. They are fairly easy to set up and offer personal liability protection for their members. Flexibilty and tax considerations offered by LLCs make them a viable business structure and worth sonsideration when deciding what is right for your business.
Michael Jagoda has been an online business owner since 1996 and has over 12 years experience incorporating and forming llc?s. He currently owns and operates Start Biz Here an online LLC formation service that provides business owners an fast and easy process to set up an llc.
Posted by Dan on Thursday, June 2, 2011 at 9:25 pm?
Filed under Corporations LLC ? Tagged with Asset Protection, benefits, Business Activities, Business Type, Corpora, Corps Members, Debts, Double Taxation, Example Members, Forming, Forming An Llc, Jagoda, Legal Business, Liability Protection, Limited Liability Company, Llc Llc, Llcs, Paperwork, Personal Assets, S Corporation, Share Holders, Sole Proprietorship
Source: http://www.theyellowads.com/legal/benefits-of-forming-an-llc
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