What is an LLC?
LLC stands for Limited Liabilities Company. It is a type of company which combines the perks of a partnership with that of a corporation. It is the safest type of company to form. In an LLC the company owners are not required to file corporate tax returns instead they can file an individual report of their profits and loss on their individual tax returns, meaning you can avoid double taxation.
The formation of LLC is very simple when compared with the formation of C. corps or S. corps. In order to start an LLC you are required to choose the right name for your company, decide its owners i.e. members and managers, fill up the LLC forms, draft and file your articles of incorporation in the state secretary’s office, along with all the required documents like your ID numbers, tax ID application numbers etc.
Some Benefits of LLC have described below;
No need to be permanent U.S citizens:
In order to form an LLC you are not required to be a permanent resident in the U.S. A foreigner or immigrant can also start an LLC. All you need to do is to fulfill the legal criteria of your state in which you want to start your company and you are all good to go.
One more plus point of owning an LLC is the legal protection it provides to you and your business. It protects its owners against the debt and any judgments against the business, because of this LLC is the preferred form of business.
With the development and advent of the LLC forms, the business owners can now enjoy different tax benefits. The LLC owners are treated as sole proprietors and the LLC as a sole proprietorship. So, the LLC enjoys the tax benefits of Sole proprietorship like; owner compensation in form of profit distribution, lower marginal tax bracket, passing through of business loans etc.
Setting up an LLC is very easy and less complicated when compared with other types of business corporations. It requires less paperwork. You are required to create an LLC operating agreement which will create and govern the rules and regulations by which the LLC will operate. So, setting up an LLC is quite easy.
This is the most prominent benefit by which many businessmen prefer LLCs over other company types. LLCs provide tax flexibility because the IRS i.e. Internal Revenue Services, does not consider an LLC as a separate business entity which means that the IRS cannot directly tax the LLC instead the members of LLC are given open choice of the taxation method which they want to adopt i.e. they can be taxed as a single member just like sole proprietorship or can be taxed like in a traditional partnership or the LLC can also be filed as a corporation in which the members will decide to pay taxes like a corporation. Generally, all of this is decided beforehand in the LLC operating agreement by the members.
Just like corporations, the LLCs provide their member’s protection from liabilities. Which exempts the members from direct liability of taxes, debts and other loses. This means that no member can be held directly accountable for the LLCs debts or taxes. One more benefit of owning an LLC is that the LLCs shields the personal assets of their owners from the liabilities of their business. This means that no matter in how much debt your company is no one can seize your personal properties. In this way, the LLC acts in the same way as corporations do but the laws for LLCs are more flexible.