Limit Liability Company (LLC)

An Limited Liability Company (LLC) allows the company to be classified as a partnership for tax purposes. Members, the owners of LLCs, pay personal income taxes on their share of any LLC earnings. They do not pay any income tax at the company level. An LLC with two or more members is treated like a partnership for tax reasons unless it chooses to be treated as a corporation. Single member LLCs are treated like a proprietorship for tax purposes.

Advantages

  • Limitation on liability
  • There are no restrictions on the number or type of owners
  • Flexibility of capital structure
  • Flexibility in allocating income and expense to owners
  • Flow through of taxes to individual owners

Disadvantages

  • Might be more expensive to create than a sole proprietorship or general partnership
  • Variation of requirements from state to state. Laws aren't as uniformed as they are for corporations
  • May incur more legal issues since some LLC statutes are still untested in court with many situations

Structures:

Starting a Business

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