Limited Liability Company Advantages (LLC)

Federal and State Tax Laws treat an LLC like a partnership, or for a single member llc, like a sole proprietorship. However the owners of the LLC are not personally liable for its debts or liabilities.

Limited Liability

Under all of the state laws, the owners of a LLC are not personally liable for its debts and obligations.

This means that you will not be personally liable for the corporate debts and obligations of your company as long as all corporation formalities, state and federal regulations and filing requirements are met.

Pass through taxation

The LLC allows the owners to report taxable income on their personal return. The LLC entity does not pay income tax.

Ownership requirements

All states allow an LLC to be formed by one or more people.  S corps have ownership limitations that require that S-corporation must have fewer than 75 members and that each stockholder be either a natural person who is a resident or a citizen of the US.  Limited Liability Companies do not have these restictions.

Transfer of Ownership

The sale of members interest is subject to securities laws.  If you are planning to sell your LLC we suggest that you consult with an attorney.  (Note:  There are exceptions for owners who do not advertise the sale and the sale is to a small number of sophicated investors.)

Distribution of Income

Unlike the Corporation, an LLC may decide on the method for distributing income to its owners.  A corporation is required to distribute based on ownership percentages.  In contrast an LLC may decide to split up its income however it chooses, and it is not required to follow ownership percentages.

Management

Typically, the owners are also the managers for the limited liability company.

Many businesses choose to form an LLC over a corporation to avoid the double taxation that can occur to owners of a C-Corporation.  Other people choose to form an S-Corp to obtain pass through status for their corporation.