As a new entrepreneur, you may have come across the term "Limited Liability Company" and wondered what this is all about. Well, this is United States’ version of "Private Limited Company". It is a combination of sole or partnership proprietorship having a corporation's limited ability. Take note that LLC (Limited Liability Company) is never considered as a corporation. However, it is a company (in a legal form) which offers limited liability to its proprietors in various aspects. Another thing to remember is that this is not created for profit. In many states however, LLC is not allowed for certain professional services which need state professional license like medical services or legal services.
However, they can create a professional limited liability company or "PLLC" instead. If you are in New York, you can check how to form an LLC in New York online course. In the same manner, if you are in Michigan, know how to form an llc in Michigan. This is to make sure that you get the right information on how LLC is formed in your particular state. Each state has "default rules in governing LLC, unless it is provided in the operation agreement. LLC has flourished and has been reputed to be the most popular form of business in America. Together with its earned reputation are the issues in its new statutes. This is specifically true to New York, Florida, Colorado, California and Georgia. These states have subverted personal asset protection.
Meanwhile, LLC offers a lot of advantages. One is its tax regime. Its tax can be treated as partnership, sole proprietor or corporation so long as they have met the needed requirements. This means enjoying tax flexibility too. Another advantage is the limited liability that it enjoys regardless of its multiple members. The members may opt to be taxed as partnership. And they can decide for a distributive share of income, loss, gain, credit and deduction. This will be based on the company's operating agreement apart from the ownership percentage of each of its member. This is as long as the rule is stipulated on the Treasury Regulations (26CFR) 1.704-1.
Another benefit that one can enjoy from LLC is the protection from liability that each member gets. This can be a liability from debt of LLC, basing on the sate shield laws. Other benefits include no citizenship restriction, unlimited members as long as they are citizens of the country. LLC also has few admin paper works as well as record keeping, unlike corporations do. And as long as it is not taxed as C, Corporation, it can have "pass through taxation" or a type of taxation that is not doubled. Profits are also taxed personally and default tax classification is used. LLCs are often times treated as separate entities from its members and can be created with only a single person involved.
So, if you are a newbie who want to know how to start a business, may as well orient yourself on how LLC works as well. Who knows, this may work to your advantage.
Dennis Campbell hasn't published any decks.