What is a limited liability company?
A limited liability company, commonly called an “LLC,” is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. Like owners of partnerships or sole proprietorships, LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. Like owners of a corporation, however, all LLC owners are protected from personal liability for business debts and claims — a feature known as “limited liability.” This means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can’t reach the personal assets of the LLC owners, such as a house or car. (Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.) For these reasons, many people say the LLC combines the best features of the partnership and corporate business stru
A limited liability company (LLC) combines certain attributes of a corporation and a sole proprietorship or a partnership. Since an LLC is not a corporation, it provides the flexibility of organization of a proprietorship or a general partnership–you don’t have to have shareholders, directors, and officers, to say nothing of the mandatory meetings. And it has the same pass-through taxation that sole proprietorships and partnerships do. But because an LLC protects against individual liability, it can give you the same protection as the shareholders of a corporation enjoy. As an owner of an LLC, you won’t be at risk for more than the money you invested–creditors won’t be able to come after your personal assets. An LLC is attractive to entrepreneurs because of the combination of flexibility, limited liability, and avoidance of the two-tiered tax on C corporations. Other features of LLCs make them attractive. First, the owners (called members) can have full or limited management rights,
A limited liability company is very similar in structure to a corporation, except that the liability of the owners is limited — hence the name. In the United States, a limited liability company is often referred to as an LLC — many people incorrectly interpret this acronym to mean limited liability corporation. In the United Kingdom, a limited liability company is marked as Limited or Ltd., in contrast to public companies, which are referred to as PLC. The limited liability company is a relatively new innovation in the United States, intended as a way to help small businesses gain many of the benefits enjoyed by corporations, while allowing them to retain their small business model of ownership. A traditional corporation requires a number of things that a limited liability company does not need to create. Corporations have shareholders, for example, and must meet a certain number of times per year at shareholder meetings to make decisions. A limited liability company does not have sh
[US] Limited liability companies, or LLCs, combine the personal liability protection of a corporation with the tax benefits and simplicity of a partnership. However, there are still other important differences. The following discusses the main advantages and disadvantages of corporations against LLCs. • Advantages: • Profits are not subject to social security and medicare taxes. Salaries and profits of an LLC are subject to self-employment taxes, currently equal to a combined 15.3%. With a corporation, only salaries, and not profits, are subject to such taxes. This advantage is most significant for stockholder-owners who take a salary of less than $72,600. • For example, if an owner-employee of an LLC earns $20,000 in salary and is distributed $40,000 of the LLC’s profits, a 15.3% tax would have to be paid on $60,000. For an S-corporation, social security and medicare taxes would only have to be paid on the $20,000 salary. This saves the stockholder-employee over $6,000 per year. Pleas
A limited liability company, commonly called an “LLC,” is a business structure that fits somewhere between the partnership or sole proprietorship and the corporation. Like owners of partnerships or sole proprietorships, LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. Like a corporation, however, all LLC owners are protected from personal liability for business debts and claims — a feature known as “limited liability.” This means that if the business owes money or faces a lawsuit for some other reason, only the assets of the business itself are at risk. Creditors normally can’t reach the personal assets of the LLC owners, such as a house or car. (Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.) For these reasons, many people say the LLC combines the best features of both the partnership and corporate business structures.
