Limited Liability (LLC) Advantages

Advantages of an LLC

The Limited Liability Company (LLC) is now recognized as a business structure in all 50 states and the District of Columbia. An LLC is a hybrid business entity that combines the tax advantages and management flexibility of a partnership, with the asset protection of a corporation. LLCs are a popular choice for sole proprietors or small partnerships that are seeking to form a business entity to separate and protect their personal assets (bank accounts, investments, real estate, etc.) from the debts and obligations of their business.

Reasons to Form an LLC

  • Limited Liability. Like the shareholders of a corporation, the owners (also called members) of an LLC have limited liability for business debts. This means that, in a properly structured and managed LLC, owners should only be liable up to the amount of their investment. Their personal assets should be protected from a judgment or other action against the business. 
  • Pass-Through Taxation. An LLC with only one owner is automatically taxed as a sole proprietor unless it elects otherwise. An LLC with multiple owners has a default classification of a partnership. Members report their share of profit and loss in an LLC on their personal tax returns, and no separate tax is assessed on the company itself.
  • Citizenship. Unlike a Subchapter S Corporation, the members of an LLC do not have to be citizens or permanent residents of the United States in order to form an LLC in the United States.
  • Management Flexibility. An LLC may be managed directly by its owners, or a manager may be designated to run the business, whereas a general or ¿C¿ corporation must have a board of directors. Unlike a Subchapter S corporation, an LLC may have an unlimited number of owners. 
  • Simple Recordkeeping. While corporations are required to hold annual meetings and draft meeting minutes, LLCs do not have this requirement. An LLC does, however, need an operating agreement (similar to bylaws in a corporation) that will specify how and by whom the company will be managed.  CorpAmerica can assist you in completing an operating agreement.
  • Special Allocations. An LLC is not required to allocate profit and loss in proportion to ownership interests. This means that, though an owner may own 50% of the LLC, they may be entitled to receive a lesser or greater percentage of the profit or loss in the company. Corporations must generally allocate profit and loss according to ownership, and most LLCs follow the same pattern.

Start an LLC Today

If you are ready to form your new LLC, complete our short online order form.  If you have any questions, or prefer to get started by phone, contact a business specialist at 877-246-2462 (toll-free) or 302-636-5448.

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Did you know?

Statistics tell us that an estimated 50,000 lawsuits are filed every day in the United States. Forming a Corporation or LLC will limit your liability and help protect your personal assets.