What Is the Purpose of an LLC?
An LLC is a Limited Liability Company. According to the IRS, an LLC is a business structure permitted to exist by state statute. It offers the personal protection of a corporation.
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Purpose
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An LLC offers the benefit of a corporation in that it provides personal protection from all business debts incurred by the company. This is what is meant by "limited liability."
Benefits
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Due to its structure, the LLC is a pass-through tax entity. This allows all profits and losses to pass through to the owner, who then reports them on personal tax returns just as in a sole proprietorship or a partnership.
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Features
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Only the assets of a LLC can pay creditors for business debts. Creditors cannot legally attach personal assets such as the owner's home, car and other personal possessions.
Considerations
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While setting up an LLC is more difficult than setting up a partnership or sole proprietorship, conducting such a business is much easier than running a corporation, according to nolo.com.
Exceptions
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Protection is not absolute if the owner does not keep personal affairs separate. An LLC owner receives no liability protection if bank loans or business debts are personally guaranteed, if he fails to pay taxes, or if he personally injures someone.
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References
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