Whats so great about limited liability companies (LLCs)?
LLCs combine limited liability with passthrough tax treatment. They can offer benefits unavailable from S corps, their nearest rival (for businesses other than professional practices). The key benefits: A way to allocate certain tax benefits disproportionately among owners. Opportunity for greater loss deductions. Avoiding or reducing tax when a new owner joins the business or when distributions are made to owners in business liquidation. Some state do, and some don’t, allow LLCs with a single owner. Where allowed, the owner can choose under check-the-box rules to have the LLC disregarded for tax purposes (without losing LLC limited liability), and pay tax directly on LLC income. S corps are a good alternative where single member LLCs aren’t allowed. And they can also postpone tax, as compared to LLCs, where the business is to be bought out by a corporate giant.
