Limited Liability Company (LLC) is basically a new type of business organization structure. It was started in Wyoming in 1977. This type of business structure is neither a partnership nor a corporation. However, it consists of features and benefits of both of these. The individuals involved in the setup of a limited liability company are known as its members and not shareholders. What gives this type of business organization its name is the fact that the liability of members is limited to their investment in the limited liability company. This implies that that they are not liable for paying off the debts incurred by the company.
The laws and other rules governing the setup of limited liability company differ from state to state. There may be cases in which the LLC has only one member. In that case the sole member will be viewed as the entity performing the activities of the LLC. However the LLC having multiple members avoids the double taxation because the members are the partners for the purpose of taxes.
There are various advantages of the limited liability company over the corporations and the partnerships ventures. Some of the most important ones are tax advantages and limited liability. Apart from these two the LLC have more flexibility when developing a management and ownership structure. The benefits related to tax of a limited liability company are gained through the pass-through taxation method. In this the profits from the business will be taxed only once and the owners are not required to pay both the personal and the corporate income tax on the income of the business.
The other benefit is limited liability. This means that it limits the owner’s liability to the amount of money that he/they have invested in the company. Any kind of responsibility of debts above the invested amounts are the liability of the corporate entity and not the ownership group.
The third advantage its flexibility. It provides appropriate flexibility to business owners to develop their own management structure and ownership system. The members can themselves decide on the management type they desire. It may happen that all the members or a small group or a single member can run the company. In addition to it an outsider can also be appointed for managing the activities of the company. However, the management parameters are basically set out in a document called the operating agreement. Apart from these one of the most important advantages of LLC is that it is really easy and simple to operate than other forms of registration.
Limited liability company (LLC) can be ideal and perfect for various types of businesses. In fact it has become the strongest asset protection device for your business. Due to all these reasons the limited liability company structure is gaining importance and popularity in today’s competitive as well as fluctuating business world.