LLC

What is an LLC?

Quickly becoming one of the more popular types of business structures, LLC’s provide limited liability benefits similar to a corporation combined with pass-through tax benefits similar to those of a partnership or sole proprietorship.

In the United States an LLC is one of the most commonly found types of businesses as a result of its ease of formation and protections involved. When you have a business with multiple partners an LLC is usually described as one of the most favorable structures. An LLC comes with a number of protections against your personal assets as well as a title that can help a business appear more respected and legitimate when compared to businesses that have not received the LLC title officially.


PROS AND CONS

There must be at least two or more partners within the partnership, and there is no limit to how many partners you can have in a partnership.

  • Pass through tax structure: with no need to file a tax return to report company profits at the company level, LLC members are only required to report their share of profit and loss with individual tax returns, avoiding double taxation like corporate tax structures present. As an LLC you actually have the ability to choose exactly how you would like to be taxed, as a sole proprietor, partnership, s-corp or c-corp.
  • Legal protections: although owners do not receive the same level of legal protections that they might receive from a large-scale Corporation, assistance will be provided for limited liability on debts and obligations for the business. Making sure that many of your personal assets would not be at risk from lawsuits and issues with your business add an extra level of protection for the future.
  • No residency requirement: owners of an LLC don’t need to be permanent residents or a US citizen in order to apply. Other business structures do require residency or evidence of residency in order to proceed.
  • Improved credibility for your business: with the assistance of an LLC your business can become instantly more credible. Often times suppliers, lenders, partners and others will look toward your business more favorably once you’ve registered the protections and professional titles of an LLC for your company.
  • Less paperwork and record-keeping than is required by a Corporation. More levels of protection against investors interested in purchasing full fire sale claim of a company.

CONS

  • LLC’s have limited potential for growth: an LLC doesn’t allow for the creation of stock which may inhibit investor support. You really need to incorporate if you’re looking for the chance at obtaining long-term investment support.
  • LLC’s have different requirements: the big problem with LLC’s is that they can mean different things around the world and in different states. Not only are the requirements for applying for an LLC different depending on the state or area that you’re in, but the amount of liability can also change depending on the area or state that an LLC is formed in.
  • Extra self-employment taxes: you could potentially be subject to extra levels of taxation depending on where you live. Self-employment tax earnings can come into effect on certain types of earnings. This is that if your company takes off quite rapidly and you take a large salary, you could be bumped into a very large tax bracket early, potentially causing you to pay extra taxes.

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