1.14:
Limited Liability Company
A Limited Liability Company, or LLC, is a type of business structure that combines the flexibility of a partnership with the limited liability protection of a corporation.
It protects its owners from personal liability for the company's debts or legal actions.
LLCs serve a broader range of businesses than LLPs, which are mainly for professional partnerships.
Unlike corporations, LLCs require less paperwork and are subject to fewer regulations and formalities, making them easier to manage and operate.
Let's consider five people starting a pet grooming business called Furry Friends LLC. All five entrepreneurs are considered members who hold ownership interests in an LLC.
The LLC does not pay taxes. Instead, the members pay individual taxes for their share of profits and are only taxed once for federal income tax purposes.
If the business fails, the personal assets of members, such as their houses or cars, will not be at risk.
LLCs are a popular choice among small business owners because of their safety and flexibility.
However, LLCs find it harder to get external investment, which might make it more challenging for them to grow and expand.
1.14 Limited Liability Company
A Limited Liability Company (LLC) offers flexibility and protection for business owners. Unlike sole proprietorships or partnerships, LLCs shield their members' personal assets from company debts and legal issues, which is essential for safeguarding personal wealth.
The management structure of an LLC is adaptable, permitting either member management or appointed managers. This flexibility allows owners to choose the best management style for their business needs. To register an LLC, the registrant must select a unique business name, file the necessary paperwork with the state, and pay the required fees. This process officially establishes the LLC.
"Eco-Friendly Cleaning LLC," established by three friends, is an example. This LLC structure allows them to manage the business collectively while protecting their personal assets. They filed the required documents and now run their business smoothly.
LLCs also have fewer compliance requirements than corporations, with less frequent meetings and simpler record-keeping. Although attracting large investors can be challenging LLCs remain popular for small business owners due to their simplicity and protection.