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Benefits of an LLC
There are many
benefits of an LLC. The limited
liability company (LLC) is a relatively new legal entity which was
formed specifically to provide a host of benefits not offered by
other entities.
Given all the benefits of an LLC that are available to business
owners, business people, lawyers and
accountants now consider the limited liability company as the presumptive entity of choice
for the new business start-up. |
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The limited liability laws were
specifically designed to provide new business owners with a legal
entity that has all the advantages of other legal entity choices but
without the disadvantages of those same other entities.
This report summarizes the major benefits of the LLC as a business
vehicle:
Limited
Liability
One of the biggest
benefits of an LLC is that all owners of a limited liability company are protected from being personally liable for the debts,
obligations and lawsuits of the LLC. This LLC benefit basically
states that a member is not liable just because he or she is a
member/owner of the LLC. There are important guidelines and
principles that all LLC members need to know and follow to ensure
that this limited liability protect is not lost.*
Entity
Status
Another benefit of
an LLC is that the limited liability company is its own
separate entity. This means that an LLC is a legal person separate
and apart from its owners. This is important from a business
continuity perspective. If a member, manager or a key employee dies
or leaves the business, the business still continues.
Management Structure Options
A third of the
benefits of an LLC is that it is a flexible entity when deciding how
the business will be managed. The members of a limited liability
company can
choose between two simple management structures: (i) member managed
or (ii) manager managed. The LLC laws afford this benefit of an LLC
by allowing members great
flexibility in deciding how they want the limited liability company business to be managed
and what rules to impose upon the LLC when it comes to governance
and management.
Informal
Decision Making Procedures
The LLC laws
intentionally impose very little formalities when it comes to
limited liability company decision-making among members and managers.
This provides great benefits of an LLC because the owners can focus
more on operating the business without worrying about a lot of
formalities or maintenance. However, some limited liability
company maintenance is recommended to preserve the limited liability
benefits of an LLC.
Flexibility in Ownership Structure
The LLC laws are
based on contractual flexibility . This means that the laws allow the
members themselves to decide the ownership structure, right to
profits, voting rights and any other expect of the member
relationships amongst each other and the limited liability company
itself. Accordingly, the LLC can be used for a wide variety of
business structures -from the most simple to the very complex. . .
another one of the many benefits of an LLC.
Flexible
Tax Choices
The tax choices for
an LLC is probably the second most popular of the benefits of an
LLC. In 1997, the
Internal Revenue Service passed a regulation which cause the limited
liability company to become a popular business vehicle for small
business. The regulation, known as the Check the Box
regulations, basically allows for the members of the limited
liability company to choose how
the LLC will be taxed for federal income tax purposes.
For the single member LLC that is owned by an individual, the
limited liability company
can take advantage of having simple sole proprietorship federal
income taxation but without the personal liability of sole
proprietorships. For the single member LLC that is owned by an
entity, the tax choices afford the business freedom from the complex
consolidated return regulations.
For the multi-member LLC, the law allows partnership pass through
taxation without requiring the limited liability company to comply with all the complex
rules imposed upon a corporation that wants pass through taxation.
At the same, time both a single member and multi-member LLC can
each choose to be taxed as a corporation as well. As you can
see, the tax benefits of an LLC provide more choices than tax
choices of other legal entities.
Details about our Service to
Form an LLC
Forming an LLC
LLC Operating Agreement
LLC Information at LLC Learning Center
Back to the
Limited
Liability Company Home Page
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