Business 101: What Really Is an LLC?
You may ask yourself, what is an LLC? A proper name would be a Limited Liability Company.
An LLC can be a great way to grow your small business. With this in mind, it offers you limited liability which can be helpful to its members.
An LLC is an American business structure. It offers the protection of a company with the taxation of a sole proprietorship or some sort of partnership.
The simplest way of structuring your business is forming an LLC. It is built for your personal assets if things go south and your business is sued. For this reason, LLCs are one of the most popular and reliable types of business legal structures, especially if you are starting a small business or a startup.
Important to realize – they can offer a lot of benefits. But there are some downsides you’ll want to inform yourself about. Here you can find out all about it, with our Business 101: What really is an LLC – you won’t have to wonder any longer.
Do You Actually Need to Have an LLC?
If you are thinking about forming a business entity that:
- Gives you the opportunity to form as a single member
- Doesn’t have a limited number of members
- Allows you to file your taxes as other business entity type
You will need a Limited Liability Company.
The Benefits of an LLC – What Are They?
As a business owner, you may decide that you need an LLC, so you need to know all of the biggest benefits it can give you.
One of the most important benefits of an LLC is that it protects its owners’ personal assets. If your business faces any legal issues, you should be safe and secure.
Let’s pretend that your business is hit with some sort of a lawsuit. If it’s an LLC, your precious assets are safe from any loss your company may suffer.
Also, if you are dreading the paperwork, it may help to know that an LLC requires a minimum amount of documentation.
And, this is what makes it better than other business structures. While other business entities always need their annual reports, director meetings, and state requirements, LLCs have much fewer forms that you need to worry about.
Taxing LLC – How to Do It?
One other benefit of having an LLC is that they are not subject to separate federal taxes. This goes unless the LLC is a C-corporation because profits you make and losses that may occur are going directly on to each owner. They will then submit that information with their personal income tax return.
This business structure can help you in the long run by avoiding the double taxation that many companies experience. Especially, where the business pays taxes on their profits, which are then taxed again and can create a problem.
However, if you are a business owner, you must pay self-employment taxes. By doing this, you may also find yourself in a much higher tax bracket.
If this happens, business owners may be able to save some money by electing to be taxed as an S-corporation.
Get Professional Formation Advice Today!
If you are thinking about forming your own business, pat yourself on the back because this is an important turning point in your life! Let our professionals help you at Your Part Time Accountant with any questions and small business inquiries. Our trusted advisers can offer support with your business journey!