What Is the Advantage of Creating an LLC for a Business?
Limited Liability Companies offer an alternative to the complexity of corporations and the drawbacks of sole proprietorships and partnerships. In general, LLCs are a simpler business form. Every state in the United States offers LLCs.
Other People Are Reading
-
Liability
-
The major advantage of LLCs is its protection from liability. If an LLC has debts or is sued, the plaintiff can only seek damages from the business' assets, not the personal assets of its members.
Tax
-
LLC taxation is very flexible. LLCs are considered pass-through entities, which means their members can report tax on personal tax returns. This greatly simplifies accounting. An LLC can also elect to be taxed as a corporation, which may result in a smaller tax bill.
-
Paperwork
-
LLCs need not issue quarterly reports, have formal meetings with minutes and they don't issue stock. They apply with articles of organization and an operating agreement to specify the roles of each LLC member.
Flexibility
-
LLCs can be set up by an individual or partnerships between two or more members. Each LLC can be set up to award different members a different share of profits depending on a pre-arranged contribution of effort.
Cost
-
In general, it is cheaper to set up an LLC than a corporation. While annual tax requirements are high in some states--California requires a minimum annual payment of $800--the general filing fees are lower.
-
References
- Photo Credit Image by Fotolia.com, courtesy of Cora Reed
