April 19, 2016 by Chuck Christiansen
A Limited Liability Company (LLC) is business structure that provides the limited liability protection features of a corporation and the tax efficiency and operational flexibility of a partnership.
Unlike shareholders in a corporation, LLC’s owners are not taxed as a separate business entity. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC members report profits and losses on their personal federal tax returns, just like the owners of a partnership would.
The owners of an LLC have no personal liability for the obligations of the LLC. An LLC is the entity of choice for a businesses seeking to flow through losses to its investors because an LLC offers complete liability protection to all its members.
Advantages of LLC:
- Pass-through taxation
- No restrictions on the number of members allowed
- Members have flexibility in structuring the company management
- Does not require as much annual paperwork or have as many formalities as corporations.
- Owners are not personally responsible for business debts and liabilities
Disadvantages of an LLC:
- More expensive to form than sole proprietorships and general partnership,
- Ownership is typically harder to transfer than with a corporation
- Limited Life