Benefits of an LLC

The abbreviation LLC stands for Limited Liability Company and is a form of corporation created to suit the small American business owner. The LLC is a hybrid that incorporates the limited liability and tax efficiency offered by traditional company forms (such as C and S corporations) into the low-maintenance partnership form. The LLC was created to be easy to set up as well as manage and it is also a comparatively inexpensive company form.

Within the United States, Limited Liability Companies can be formed in all 50 states and Washington D.C. (District of Columbia). Before you set up your LLC it can be a good idea to take a closer look at the legislation in more than one state because each state is free to set up its own laws and tax policies for LLC’s. The ideal state for you might therefore be another state than you home state. Nevada and Delaware are currently among the most popular states among American enterprises that do business in more than one state, due to their beneficial treatment of LLC’s. 

The major benefits of an LLC

1. You do not have to hold a U.S. citizenship to form or become a member of an LLC. Many other company forms are only open for U.S. citizens.
2. You can set up an LLC without having a business partner. This is impossible with many other forms of limited liability solutions.
3. The abbreviation LLC stands for Limited Liability Company. By forming an LLC, you can safeguard your own personal assets. Don’t place yourself in a situation where you are forced to sell your home and evacuate your family just because a disgruntled customer decides to sue your company. By forming an LLC instead of doing business in the form of a simple partnership you can choose how much of a risk you are willing to take.
4. The LLC form was created to be suitable for small-scale business owners. This means that mandatory recordkeeping and required administrative work has been kept as low as possible. You will be able to spend time on your business instead of being stuck with mile high piles of mandatory paper work.
5. In an LLC, both profits and losses are passed through to the members (owners). This makes it easy to avoid double taxation and you don’t have to hire an expensive lawyer to sort out things for you.
6. An LLC can always choose to be taxed as a corporation, a sole proprietor or a partnership. The choice is up to the owners (members). If you change your mind and want the LLC to be responsible for paying taxes, you only have to fill out IRS Form 8832.
7. With most company forms, it is very difficult to allocate profits and losses disproportional to ownership interests since it will be illegal or cause major tax ramifications. For an LLC, disproportional allocation of profits and losses is perfectly legal and does not lead to dire tax ramifications.
8. With an LLC, you don’t have to create a board of directors or worry about annual general meetings for shareholders.

The LLC form is convenient when the sole proprietor of a company is forced to step down, e.g. due to health reasons or death. Once an LLC has been created, it will become a separate entity and business termination will not be required.