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LLC Benefits as a Business Entity

Last updated Friday, February 12, 2021

 

An LLC gives you the benefits of a corporation without all of the hassles. LLCs are popular because they are not only very easy to form, but they are also easy to run. They make taxes much more streamlined, and they have limited liability for owners too. By some estimates, there are roughly 21.6 million LLCs in the United States. In comparison, there are approximately 1.7 million traditional C-Corporations. There are another roughly 23 million sole proprietorships as well. Some of the most important benefits are outlined below.

·        Limited personal liability

 An LLC is a separate legal entity. It can hold real estate, create contracts, get sued, and take on debt, just like you can as an individual. It can also be legally liable for certain obligations and commitments.

 

Like a corporation, an LLC insulates the owners of the company from business liabilities. If the company cannot pay a debt or it gets sued, the owners’ personal assets are not at risk. Instead, liability is limited to whatever assets the company may have.

 

To take full advantage of limited liability, be sure that you keep the LLC’s books, records, and bank accounts separate from your private accounts. Ensuring that your company acts like a company will help address any challenges to extending liability for the LLC.

·        Tax advantages

 Although an LLC is a separate legal entity, it is not a separate entity for tax purposes. There is no separate tax classification for an LLC. Instead, it adopts the tax status of whichever entity it would like—including a sole proprietorship, partnership, S-Corp, or C-Corp. This flexibility allows the company owners to decide which tax status will be the most advantageous for their situation.

·        Less paperwork

 An LLC does not have to meet the specific requirements regarding filing that a corporation must use under state law. Holding meetings, creating annual reports, and paying annual fees are all pretty common for a corporation. But an LLC can often avoid these time-consuming requirements. Forming an LLC is often a much easier process as well.

·        Ownership and management flexibility

 An S-Corporation has the benefit of pass-through taxation, but it cannot have more than 100 shareholders, and they cannot have foreign shareholders or shareholders that are corporations. LLCs do not have those same restrictions—and they can use pass-through taxation if they want to do that.

 

Corporations must have a certain type of ownership structure. Specifically, they must have a board of directors, along with shareholders who meet to review the company’s business. An LLC does not have to have a board of directors. The LLC members can create a management structure that works for however they want to run the company.

 

 

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© 2021 Marc Gohres

Revised February 12, 2021 7:51 AM

 

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