Advantages of LLC formation include:
Limited Liability - LLCs provide limited liability protection to its owners. Typically, the owners are not personally responsible for the debts and liabilities of the business; thus, creditors cannot pursue owners’ personal assets (such as a house or car) to pay business debts. Conversely, in a sole proprietorship or general partnership, owners and the business are legally considered the same and personal assets can be used to pay business debts.
Pass-through Taxation - LLCs typically do not pay taxes at the business level. Any business income or loss is "passed-through" to the owners and reported on the owners’ personal income tax returns. Any tax due is then paid at the individual level.
Establishing Credibility - Forming an LLC may help a new business establish credibility with potential customers, employees, vendors, and partners.
Fewer Ongoing Requirements - LLCs face fewer state-imposed annual requirements and ongoing formalities than do corporations.
Organizational Structure - LLCs are free to establish any organizational structure agreed upon by the owners.
Few Ownership Restrictions - There are few restrictions on who can be an owner of an LLC or how many owners an LLC may have, unlike S corporations. |
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Separate Taxable Entity.
