The Key Advantages of Forming An LLC
The most popular forms of business among most entrepreneurs are sole proprietorships, partnerships and corporations. There is another interesting form of business. The limited liability company is a good yet often ignored business structure. Most business owners settle for other forms of business such as partnerships when the most ideal structure for them would be a limited liability company. The key features of a partnership and a corporation are integrated in an LLC. This allows you to get the advantages of the two forms of business. It makes it easier to operate a business at low tax rates. Below are some advantages of the LLC structure.
The limited liability that an LLC offers is its main highlight. The owners under this structure are referred to as members. The liability protection that LLC offers is in a way that each member is able to operate as a separate entity. If the company has any debts, members are not help responsible at a personal level unless they made personal agreements to that. In the event that the company runs broke, no member shall be held personally responsible for debts facing the company. Each member is not obliged to take personal responsibility even if they may have the means to do so.
A great feature of the LLC is the tax incentives it offers. An LLC is not liable to corporate tax unlike all other corporations. This is usually possible because of the pass capability that LLCs have. Members are hereby required to pose the taxes with their returns as profits are shared to the members. The members have freedom in the tax plan they choose to adopt. The corporate tax option is also viable for LLC members should they choose so and think that their business will have an advantage this way.
LLCs have a very easy way of distributing the company revenue to its members. This is different from a partnership where the distribution of profits and losses is done based on the percentage of ownership or investment. With an LLC, members agree on whatever formula they choose to split the profits or losses. This business form also has few requirements for startup. The LLC company structure can be adopted by an individual entrepreneur as well as a group of businessmen since there are many different types of LLCs you can form depending on the number of participants.
Another great advantage of the LLC is the unlimited number of members that can form a single Limited Liability Company. The tax benefits of an LLC are much better compared to other forms. An LLC allows an entrepreneur to fully control their finances by changing the tax methods they are exposed to by registering as either a corporate or as a sole proprietor.