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Organizing a business as an LLC, or limited liability corporation, has a number of important advantages for the invested partners. As a result, an LLC is an attractive alternative to other corporate structures that impose ownership limitations on its partners.
Easy to Form
Organizing a small business as an LLC is an easier alternative over forming an S corporation. Although government regulation varies from state to state, an LLC is commonly formed in a single step.
Asset Protection
The risk of loss of personal assets is minimized with the LLC structure, which differentiates between personal and business assets.
Ownership
An LLC can be owned by individuals, other businesses or foreign entities. In contrast, an S corporation may only be owned by U.S. citizens.
Avoids Double Taxation
By forming an LLC, a small business avoids double taxation on its profits, which normally happens when the profits of a C corporation is first taxed on its corporate profits and again when income is distributed to shareholders as shareholder income.
Personal Income Tax
Similar to a sole proprietorship, money earned by a partner of an LLC is taxed only once as personal income for income tax purposes.
Source:
SCORE: Types of Legal Entities
SCORE: Choosing Between an S Corporation and an LLC
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