If You Are an Entrepreneur You Should Consider Creating an LLC

The business structure know as a limited liability company, or LLC, can be best considered to be a hybrid between a corporation and a partnership. To put it simply, limited liability company offers the good parts of a corporation without all of the corporate protocols.

The multiple owners, called members, of an LLC are treated like a partnership for tax purposes. The LLC passes through income taxes directly to its members, so the LLC never pays income taxes itself, unlike a corporation.

Because of this, an LLC never worries about the double-taxation issue that a corporate structure faces. To simplify this, due to the fact that the tax liability is passed on directly to the owners, any income is only taxed once. Though, an LLC is still obligated to pay state (assuming there is any) and federal payroll taxes.

At the time of LLC formation, you choose how you choose the tax treatment desired. You can be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.

Assuming that the LLC is properly set up, and personal and business activities are completely separated, the members can look forward to certain personal liability protection. This potential protection is a big reason why people choose to form an LLC versus operating as a sole proprietor. Also, a company generally earns more admiration when it has a formal business structure, such as a limited liability company.

LLC formation is performed by a person who does not necessarily have to be a member. There are actually several very good online companies that will form your LLC for a very nominal charge, which means you are assured that the structure is set up correctly.

Typically, a member’s financial liability is limited to the financial contribution made by that member. And an LLC’s structure allows you to bring in multiple partners, who can either be actively involved in the company, or just contribute money.

An LLC is a business structure that is very very much like a corporation, but offers member more flexibility. Starting an LLC is most suitable for a smaller business in which there doesn't have to be too many owners.

The limited liability company is a relatively new type of business structure, at least in the United States. As a matter of fact, as early as 1986, you could form a limited liability company in only two states. Today, you can form an LLC in every state.