LLC FAQS

What is a limited liability company?

Simply one of the most exciting new ways to organize a new business to have been developed in the last couple of decades! It is a new type of status that maximizes both tax advantages and liability protection.

How does an LLC maximize tax advantages?

With a "C" corp., owners are taxed twice. First on corporate profits and then on personal income when profits are distributed as dividends. The situation is somewhat improved with an "S" corporation, in that corporate profit can flow through personal income, thereby subjecting it only to single taxation. The problem with "S" corporations is that they are fairly restricted and therefore lack flexibility.
NOTE: With an LLC, profits are taxed as they would be in a partnership, only once, at the personal level.

How does an LLC maximize tax advantages?

A key feature of incorporation is the "corporate shell" placed around assets owned by the corporation, making them separate and distinct from personal assets. With corporate status, and individual's personal assets are for the most part protected. In a partnership, this protection is given up, usually to secure the tax advantages of partnership.
NOTE: The exciting thing about an LLC is that it provides full corporate protection even while giving the tax advantage of a partnership.

Does an LLC provide shareholder flexibility?

In a "C" corporation anyone, or any number of entities may be shareholders.
In an "S" corporation, there may be no more than 70 shareholders, and no foreign or corporate shareholders. In a partnership there must be at least one "general" partner, who has full liability and any number of "limited" partners, who have liability limited to their investment, but may also have no involvement with the management of the company. Even this degree of protection is not allowed in every state.
With a Limited Liability Company there may be any number of members and they may be foreign or they may be corporate.
NOTE: An LLC has all the flexibility of a "C" corporation that is lacking in an "S" corporation and a partnership.

Is an LLC widely accepted?

Virtually every state has adopted them and many thousands have been formed so far. Business Week calls it a "safer strategy for small business."