LLCs are not incorporated, but organized and structured by business owners. They have fewer corporate formalities and can be taxed by the IRS as a sole proprietorship. You have the option as an LLC to be taxed as an S corporation or C corporation.
Forming an LLC online can be more efficient and easier. You can have your LLC files prepared and organizational private documents drafted. You can receive your Federal Tax Identification Number earlier.
If you have additional questions about forming an LLC or wish to get started on establishing one, please visit legalzoom.com to learn more.
An LLC possesses the limited liability benefits of a corporation and the flexibility of a partnership in terms of sharing profits. For federal income tax purposes, an LLC can choose to be represented as a partnership or corporation.
An LLC legal form has an advantage in flexibility, this is applied to the distribution of profits and management responsibilities. Founders of the business can choose to invest a portion of their resources to start the venture, but maintain all management control. Other investors may not enjoy a share in profit that is proportionate to the amount of capital they invested.
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- Limited liability protection for owners who are not personally responsible for the debts and liabilities of the business.
- Creditors cannot use personal assets (house, savings, etc.) of owners to relieve business debts.
- LLCs do not pay taxes as a business. Taxes due are paid by the individual owners and business income is reported on their personal income tax returns.
- Increased credibility makes LLCs look more attractive to potential customers, employees, investors, and partners.
- There are few restrictions for who can own an LLC or how many owners it can have.
- Almost any organizational structure can be formed by the business owners.
The flexibility of LLCs can also be a risk. Owners must agree upon a contract that outlines their division of profit, share of management authority and responsibility, rights to withdraw resources, and obligations to invest additional capital when necessary.