Business Incorporation

A limited liability company, or LLC, is easiest described as being a hybrid between a corporation and a partnership. To put it simply, an LLC offers the best parts of a corporation but not all of the formalities usually associated with a corporation.

The multiple owners, called members, of an LLC get looked upon as a partnership for tax purposes. It is a pass-thru tax structure, so income taxes are paid by its owners, so the LLC never pays income taxes itself, unlike a corporation.

An LLC does not suffer from the double-taxation problem that a corporate structure faces. In other words, because the tax obligation is passed on directly to the owners, income tax is paid just one time. Though, an LLC must still pay state (if applicable) and federal payroll taxes.

At the time of form an LLC, a decision is made about how you choose the tax treatment desired. You can handle income taxes as if you were a sole proprietor, a C corporation, or an S corporation. The great thing about a limited liability company is that you get to decide how to handle paying taxes.

If the LLC is properly set up, and you completely separate business and personal activities, the members are afforded personal liability protection. This is one of the biggest reasons to form an LLC instead of operating as a sole proprietor. You should also consider that a business generally earns more reverence when it has a formal business structure, such as an LLC.

Forming a LLC is performed by a person who does not necessarily need to be a member. There are actually several very reputable online companies that will create your LLC for a very reasonable cost, saving you from having to ensure the structure is properly set up.

Typically, a member’s monetary liability is limited to the amount of money contributed by that member. When you are operating as an LLC, you can bring in more than one partners, who can be active in the business, or just contribute money.

While an LLC is similar in structure to a corporation, it offers member more flexibility. Starting an LLC with an incorporating online company works best smaller companies in which there doesn’t have to be too many owners.

In the United States, the limited liability company is a relatively new business structure. As a matter of fact, as early as 1986, you could create an LLC in only two states. Today, every state recognizes this business structure.

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There are certain possible legal consequences that you need to consider if you are thinking of starting, or already have started, a business. There are possibly greater legal liabilities you are subjected to as a small business owner that you did not have to worry about before you owned a business.

Another thing that you have to consider when you are your own boss is taxes. Business taxes are handled in a different way than personal taxes, so you have to be aware of what is going on with your company taxes. This is a great time to consult with an accountant.

While you probably can run your small business as a sole proprietor, this is not the best choice in most cases. There are many liability and tax reasons why you might not want to operate as a sole proprietor. Meeting with a professional regarding these matters is recommended.

So what can the average entrepreneur do? Smart business owners form some sort of business structure to protect themselves personally from liability and to take advantage of business tax laws.

A common business structure, and most likely the best choice for most small business owners, is to consider starting LLC. Set up and run properly, a limited liability company, or LLC gives you personal liability protection. Also with an LLC, you have the ability to choose how you should be taxed.

Setting up an LLC is incredibly simple. You can hire a lawyer to set up your LLC for you, which is generally the more expensive option. Or, you can use one of the less expensive Internet business formation companies for LLC formation. There is no excuse to not form a limited liability company with prices as low as $115.

Always meet with a professional to ensure form LLC is the right form for your small business. At the very least, you need to take some action to ensure that your business is separated from you, to limit your potential liabilities and take advantage of the tax benefits afforded to small businesses.

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