An LLC can elect to be taxed as a sole proprietor, partnership, providing much flexibility.
Limited liability, meaning that the owners of the LLC, called "members," are protected from liability for acts and debts of the LLC.
Much less administrative paperwork and record keeping than a corporation.
Pass-through taxation (i.e., no double taxation as in a corporation), unless the LLC elects to be taxed as a C corporation.
Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
LLCs are treated as entities separate from their members.
LLCs in most states can be set up with just one person, for example even another LLC, as a member or manager.
The benefits of LLC membership can be assigned. The economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest control.
Depreciation upon LLC assets and profit can be split disproportionately from membership between members.
Unless the LLC has chosen to be taxed as a corporation, income of the LLC generally retains its character, for instance as capital gains or as foreign sourced income, in the hands of the members.
Set up can be as quick as one day.
In some states there is no publication expense upon set up.
Given their partnership roots, LLCs are most useful in asset protection plans.
Disadvantages
It may be more difficult to raise financial capital for an LLC as investors may be more comfortable investing funds in the better-understood corporate form.
Some creditors will require members of up-and-starting LLCs to personally guarantee the LLC's loans, thus making the members personally liable for the debt of the LLC.
The management structure of an LLC may be unfamiliar to many. Unlike corporations, LLCs are not required to have a board of directors or officers.
Taxing jurisdictions outside the United States are likely to treat a U.S. LLC as a corporation, regardless of its treatment for US tax purposes. This might occur if a U.S. LLC does business outside the U.S. or a resident of a foreign jurisdiction is a member of a U.S. LLC.
Variation
A Professional Limited Liability Company (PLLC) is a limited liability company organized for the purpose of providing professional services. Usually, professions where the state requires a license to provide services, such as a doctor, chiropractor, lawyer, accountant, architect, or engineer, require the formation of a PLLC. Exact requirements of PLLCs vary from state to state. Typically, a PLLC's members must all be professionals practicing the same profession. In addition, the limitation of personal liability of members does not extend to professional malpractice claims.
Get Started
Our online LLC order form makes starting an LLC quick and easy. If you prefer to place your order by phone or need personal assistance, call an LLC Business Specialist at 1-888-494-9729. We would love to talk to you. In fact, once you set up your LLC through Why Pay A Lawyer? you can call us for FREE follow up organizational and informational tips and help at any time during our business hours for help during the process.
