Advantages of Forming an LLC

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People are familiar with sole proprietorships, partnerships and corporations.  Unknown to some however, there are also other business structures that may be more suited to their requirement.  A limited liability company (LLC) is one of those business structures.  It is a type all on its own but has the features of both a corporation and a partnership, something many think as one of the advantages of forming an LLC. An LLC, like a corporation, offers its owners limited liability.  Unlike a corporation however, it does not need to meet rigid formalities and requirements to maintain its business status.  An LLC, like a sole proprietorship or a partnership makes possible a pass-through taxation.  The basic advantages of forming an LLC boils down to its financial and taxation benefits over the other forms of businesses.

One of the most important advantages of forming an LLC is the very basis of its name, the limited liability it provides it owners.  Its owners, called members, enjoy the liability protection it provides being able to operate as a separate entity.  As such, its members will not be held personally liable for the company's debts and other acts and liabilities unless of course the member made a personal guarantee.  To illustrate, if a company goes bankrupt and owed money from suppliers, the suppliers may not sue the member on the personal level.  This means even if the member has enough personal money to pay for the LLC's debt, he is not legally bound to do so.

Another one, and a great one at that, of the advantages of forming an LLC is its tax feature.  Unlike a corporation, an LLC does not need to pay corporate tax.  This is due to the pass-through capability of LLCs.  The company passes through to its members the profits as well as the losses of the company who in turn will report them in their tax return.  However, an LLC may opt to be taxed like a corporation if it prefers it.

Still one of the advantages of forming an LLC is its highly flexible capability of distributing profits to its members.  Unlike in a partnership where profit distribution is done fifty-fifty or according to the percentage of ownership or investment, an LLC may opt to distribute profits the way they wan to. It can be according to the work invested on the company by the member or whatever distribution formulas the members may agree to elect. 

The abovementioned advantages of forming an LLC are the most recognized benefits a limited liability company has.  Aside from those however, there are still a number of other reasons why businessmen opt to form an LLC instead of other forms of business.  LLCs provide lesser administrative paperwork and formal recording of meetings as compared to corporations.  The forming of an LLC does not need as many requirements than in other entities.  It can accommodate as many members as it wants and at the same time may be formed even with a single member only.

There are still many advantages of forming an LLC and you may see all the information you need in the internet.  Even forming one may be done online.  You may get the services of business advisors to give you an insight if this is indeed what you need.

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Shandon Lewis has 1 articles online

For more information about an LLC Definition or want to know what is llc, be sure to check out the leading source of information about LLCs: How To LLC.

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Advantages of Forming an LLC

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This article was published on 2010/04/02