Benefits of Limited Liability Company
Limited liability companies have become more popular than their counterparts, corporation structures and sole proprietorships. They are recognized in almost all states and are either owned by one person or by organizations or other corporations. While they are the newest forms of business structure, Limited Liability Company’s have numerous benefits.
1. Tax benefits
The reason why LLC have become increasing popular than other types of organizations is that owners’ personal income is taxed, but the business is exempted from taxation. On the contrary, corporations are taxed as well as the owner’s personal income. LCC’s, however are exempted from taxation, only personal income is taxed.
2. Limited liability
In general partnership or sole proprietorship, owners are responsible for their debts and losses the company accrues. In a limited liability company, owners enjoy liability and in case the business nosedives, the owner is required to declare personal bankruptcy. When the company defaults, each owner has an obligation to pay for the original sum of money that financed the business.
3. Ease of operation
Limited Liability Company is simple to start than an organization and might cost you less legal fees. In fact, you may only be required to register the business, apply for an operation license, and fill an agreement. Also, taxation is easier because members might declare overheads as personal wages instead of dividends.
4. Unlimited members
LLCs are flexible as they allow limited membership. In other cases, a limited liability company might have a functional agreement to describe ownership interests and membership duties. Therefore, make sure you understand the file operating contracts to protect yourself from legal action.
Even though LLCs provide flexibility, they do have their drawbacks, including limited transfer of proprietorship. Some jurisdiction may complicate how dividends in LLCs are shared, and due to this, investors often shun from such legal structures.