A limited liability company (LLC) is a business structure that is owned by its members. Like most corporations, LLCs provide personal liability coverage in case the provider suffers a loss. Whether to choose between incfile.com and legalzoom, a business with an LLC structure also profit from pass-through taxation like a sole proprietorship or a partnership does, and has the advantage of limited liability policy and elastic tax options. By standards, an LLC is generally the best business structure for smaller businesses. Shared below are some of its advantages that you may find beneficial.
Easy Formation & Maintenance
LLCs are generally easier to form than corporations and require less paper work. The main prerequisite for LLCs is that they should file a document of formation such as the Articles of Organization or a Certificate of Formation. In some jurisdictions, LLCs are not even required to file periodic reports, like an annual report or even a biennial report. While LLCs are required to have an operating agreement for the business, it is usually not necessary. LLC corporations, on the other hand, are usually required by legal means to hold an annual meeting of shareholders, take note minutes of the meeting, maintain shareholder records, document the company’s significant financial statements, file an annual report, and pay an annual fee. Simply, the relaxed structure of an LLC might be more appealing to small business owners, considering all the business regulations.
Liability Protection and Tax Benefits
Unlike loose business arrangements, an LLC benefits from personal asset protection. It means that if your business is sued or incurs losses, the owners’ personal assets will not be held personally liable for their LLC. This is called limited liability protection. Of course, this security has its limits. If an LLC owner fails to separate his or her business from his or her personal finances, or commits fraud, he or she also risks losing that security. On the other hand, LLC is not taxed as a business entity, which means owners can avoid double taxation. LLCs can also choose to be taxed as a C corporation (C corp) or an S corporation (S corp). The corporate tax rate can also be advantageous to an LLC.
Management and Ownership Flexibility
LLCs have few restrictions on the number of owners and how the LLC is managed. For example, an LLC can be a member-managed or manager-managed —that is, whether the LLC is managed by its members (owners) or by an appointed manager. In comparison, a corporation must have a board of directors that is elected annually by investors. These annual meetings must also serve to conduct business. An LLC does not have to adhere to these neat rules, and furthermore, owners have more choices in the management structure of their company.…
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