Creating a business isn’t easy. The owners or founders of an enterprise could find themselves in a crossroad, wondering which type of legal denomination they actually should choose. In the United States, there are several types of business forms like limited partnerships, limited liability partnerships, limited liability companies, and many others.
Out of all of these, limited liability companies (LLC) are one of the most popular types of companies in the United States industry, and have become quite popular. But what advantages does an LLC have over other kinds of companies? Let’s examine each one of them.
For starters, the main advantage of an LLC is that the members of the company are not responsible for any acts or debts of the organization. That means that if the company is going through financial trouble, the owners of the company do not have to use their patrimony to solve it.
The second principle benefit of an LLC is the reduced amount of paperwork. Since the LLC is much simpler to establish than any other kind of company and it doesn’t require an annual shareholder’s meeting (this means that the shareholders don’t have to meet in a specific physical point once a year to discuss company matters), the owners don’t need to establish a bureaucracy to take note of all of these procedures.
The third advantage of an LLC is that it can choose how it wants to be treated by federal and state income tax. For example, it can choose to be treated as a C or an S corporation (a C corporation has to pay a federal income tax, while an S corporation doesn’t need to do it).
Another tax benefit that an LLC isn’t subjected to is double taxation. In the case of a traditional company, it is taxed on its income and the profit distribution among the shareholders. Thus, double taxation. In the case of an LLC, its income is not subjected to tax; the members of the company are the ones subjected to the tax.
As you can see, an LLC type of company offers a series of advantages that need to be taken in account by any potential founder or owner. If you are interested in using this legal denomination, examine the limitations of the LLC and other kinds of organizations. That way, you will be able to select the most adequate in your case.
Bruce Stander is the marketing manager of Worldwide Corporate Services. WCS offers affordable offshore and UK company formation .