Limited Liability Company (LLC)

What is a Limited Liability Company (LLC)?

An LLC is a business structure allowed by state statute. Each state may use different regulations, you should check with your state if you are interested in starting a Limited Liability Company. An LLC is a hybrid entity, bringing together some of the best features of partnerships and corporations.

LLCs were created to provide business owners with liability protection - liability limited to LLC’s assets. Earnings and losses are included on the owners’ personal tax returns and an annual fee must be paid. LLCs have no limitation on the number of shareholders an LLC can have and any member or owner of the LLC is allowed a full participatory role in the business's operation.

What are the advantages of forming an LLC?

  • You don’t need to have a lot of financial backing to begin

  • Profits are calculated according to the time rather than the money you invest

  • Structure can be used by individuals, partnerships or corporations

  • Owners not personally liable for debt or losses

What are the disadvantages of forming an LLC?

  • You have less control - Divided authority

  • Decision making more complicated

  • Set-up usually requires a detailed agreement regarding membership and participation

  • Annual tax rate is $800 minimum, whether company is earning or not.