To begin with , what is an LLC? LLC stands for Limited Liability Company. A Limited Liability Company is a legal business  entity that handles daily business activities like a sole proprietorship for single member LLCs or a partnership for multi-member LLCs. Forming an LLC provides personal limited liability protection for the owner(s) similar to   a corporation. However, since it is not a partnership or a corporation, owners are not called partners or share holders, they are referred to as “members”. 

Forming an llc can provide  many  benefits if you own a small business. They’re simple to form and for the most part there is a fairly small amount of  paperwork involved  in the  formation  filing. LLCs also help to protect the personal assets of the member(s). In many states you can maintain the company’s good standing by filing an annual report and paying the required annual fee.  Further, as long as you operate and maintain the LLC in the right way and follow your states compliance statutes your personal assets should be protected  in the event that the LLC is ever sued ! 

Another benefit of starting an LLC is that it actually combines  the aspects of partnerships and corporations. As a result, an LLC is less formal , and more flexible than a typical corporate structure but it also offers protection and even some advantages that are the same as those of a corporation. For example, members of a properly operated and maintained LLC may not be held personally liable for company debts. Their assets are also kept apart from those of the LLC, so personal assets are given protection as well. 

Another advantage of forming an LLC   is that while they are usually taxed as a sole proprietorship or partnership, they may also decide to be taxed as a sub chapter s corporation. LLCs have  what is known as pass-through taxation which differs  from the double taxation associated with c corps. Members of an LLC will only be required to pay taxes on their earnings instead of paying both corporate and individual taxes on the same money.

Unlike a sub chapter s corporation, which has limits on the number of share holders, there is no limit on the number of owners an LLC is allowed to have. Also LLCs are not required  to have  bylaws, hold meetings or record minutes. However, it is a good idea  for the owners  of an LLC to prepare an operating agreement which sets forth how the business of the company will be conducted.  

Another advantage to you if you form an llc is that LLC’s can offer is the transferability of membership  interest. The business can survive even as changes are made to the membership   of the LLC. 

By forming an llc you will find it easier to raise capital. You can admit new   members by selling membership interests. You can even create new  classes of membership interests with different voting or profit sharing rights .  

Setting up an LLC may offer many advantages and benefits for small business owners. They are fairly easy to start up and offer personal liability protection for their owners. The flexible business structures and tax elections offered by LLCs make it well worth consideration when deciding what direction your business should take.

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