What are the primary advantages of an LLC that should be considered when starting a business?
LLC Members have protection from personal liability. LLC members may choose for the LLC to operate as a flow-through entity for which income and losses are reported directly by its members. Members may get special divisions of income, expenses, deductions and losses, and an individual member’s losses are not limited by a member’s investment.
LLC Members are protected from personal liability just as corporate shareholders. Usually the LLC will be treated as a partnership as to tax treatment: it will be a flow-through entity for which income and losses are reported directly by its members. Unlike an S corporation, special allocations of income, expenses, deductions and losses can be made among its members, and an individual member’s losses are not limited by the amount of a members investment in the LLC. It differs from a partnership in that management may be by nonmembers. It differs from a limited partnership in that members may be actively involved in the LLC’s management, without the danger of personal liability faced by an active limited partner. An LLC should be used rather than an S corporation when a business plans to have foreign persons, corporations or trusts as shareholders. It is a useful entity for estate planning purposes since trusts and estates are eligible shareholders. LLC s may soon eliminate both general
