The Limited Liability Company – What It Is and How It Can Benefit You

Since the invention of the corporation, no other legislative creation has made such an impact on the business world than the limited liability company (also known as the LLC). This modern legal entity greatly improves upon the corporation for the small private business owner because it does not impose mandatory governance requirements.

This is why the LLC is now the most popular choice among small business owners. In addition to operating a business, the limited liability company is also used often for owning and managing real property and personal property, family and estate planning. What exactly is an LLC? It is the perfect planning vehicle for providing solid personal asset protection and management.

This protection is the exact same feature offered by the corporation and it is now well recognized by courts that members of an LLC are not personally at risk for the business obligations of the entity just because they are owners.

Before, the only option was to form a corporation which is a more formal choice with more maintenance requirements. And, if you did not incorporate, you ran a business as a sole proprietorship which offered absolutely no personal asset protection. But with the limited liability company, you can obtain the protection you need without being subjected to corporate governance requirements.

Easy and Simple Management

One of the main benefits of the LLC is that there are no mandatory management structures, meetings or other governance rules. As a result, a business can be run the way that the owners and managers feel works best for the specific business.

Many businesses have extremely simple, single layer management structures while others have complex ones to accommodate a more detailed ownership or management structure. What the LLC does is allow business factors to determine what is needed.

And formation is a fairly uncomplicated matter. While states vary, most states go out of their way to make entity maintenance very simple. It usually consists of the payment of an annual fee and the filing of a simple informational report. However, each state varies some with more and some with less.

LLC has the Most Tax Choices

Plus, the IRS has decided to favor the LLC. The taxation used to be very confusing when the legal entity first came out. However, in the late 1990s, the IRS got rid of the complicated rules and basically allows each LLC to choose its taxation structure. You just need to ensure that you meet the tax deadlines for making the tax choice.

The Popular Choice for Business

Even though it is so new, the limited liability company is now chosen over the corporation by almost 10 to 1 when it comes to running a business. This is because it offers all the small business benefits of a corporation and then additional flexibility, simplicity and tax advantages.

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The Limited Liability Company – What It Is and How It Can Benefit You

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