Benefits of LLC
In the past, people found it a bit difficult to start their own businesses because there was a small middle ground. Those who were in business were either in partnerships or corporation, or partnerships with very little leverage in between. Partnership or sole proprietorship was more convenient but subjected owners to issues with regards to liability. The corporation was too confusing and much trouble for small businesses to consider. For that reason, limited liability companies were formed to offer substantial benefits and middle ground over both extremes.
1. Easier Paperwork
Although more paperwork is required with limited liabilities companies than in partnership or sole proprietorship, it takes less paperwork as compared with the traditional corporation. In fact, this is not only evident when forming the corporation, but also with issues that deal with taxes. The losses and profits pass through the company to the personal revenue taxes of the members.
2. Averts double taxation
With LLC corporations, the phenomenon refereed to as double taxation in no longer an issue of concern. This actually happens when the corporation has a directive from the federal government to pay taxes, which then enforces a personal revenue tax to members who receive payments from the corporation. This means that your money is taxed twice before it gets to you. However, LLCs are not given the mandate to file taxes; your money will not be taxed until it gets to you.
3. Health Insurance
Members of LLCs can deduct up to 100 percent of health insurance from their taxes. This helps minimize the overall tax accountability members face each year which is something beneficial that is not provided in many other forms of business.
The main disadvantage is that LLCs are more costly to create as compared to sole proprietorship of partnership. On the other hand, insurance companies and banks are not allowed to form LCCs, but state laws differ with which kind of businesses are tolerable to this status.