LLC: Limited Liability Company
A Limited Liability Company (LLC) is a business wherein owners are not personally liable or accountable for the company’s debt and liabilities. The business owners have personal asset protection with pass-through taxation. LLC is a mix of a corporation and a partnership or a sole proprietorship in form.
Moreover, it is the simplest way of forming your business to protect assets just in case someone sues your business. All entities may form an LLC except banks and insurance companies. Anybody can also be an owner, and they are called members of the LLC. Unlike a corporation, it is easier to form and is more flexible.
Who Needs It?
The most recommended thing to do for a business that is highly at risk for lawsuits and debts is to form an LLC because doing so will protect your assets.
How to Form an LLC?
Standards and guidelines differ in every state, but there is a common ground for all.
Firstly, a name must be given to your LLC. This should not be alike with those already existing in the records or sounds like them. It would be wise to choose a unique and simple name that can be easily remembered by all but also impacts the best.
Secondly, pick a registered and trusted agent. The organization’s articles that states the liabilities and duties of each member must then be prepared and submitted to the state, accompanied by a fee. Necessary information such as the name of the LLC, the name of its members and their addresses, the name of the registered agent, and the LLC’s statement of purpose must be included.
Once all in the above statements are done, you may now go to the Internal Revenue Service to apply for your Employer Identification Number or EIN. This will serve as your LLC’s number on income and employment tax filings and bank accounts.
Tax Advantages
The earnings of the business will go directly to the owners that later on will report their percentages or shares in their tax returns. Taxes are not being paid since the earnings or losses are held down to the members who reflect on their tax returns. With this being said, the LLC thus is only taxed once, or more known to exhibit the pass-through taxation.
