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LIMITED LIABILITY COMPANY
What is an LLC?
A Limited Liability Company (LLC) is one of the most popular business structures because of the protection, credibility, and flexibility it can provide your business.
How can an LLC help your business?
Providing limited liability protection is the primary advantage of forming an LLC, but the benefits don’t stop there.
Increased protection
LLC formation can help limit your personal responsibility for certain business liabilities.
Credible path to growth
A recognized structure affords your business an added level of credibility.
Ease of operation
Generally, LLCs require less operational formalities compared to corporate business structures.
Compare LLC to other business structures
| Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
Provides limited liability protection |
|---|---|---|---|---|
| Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
Can be for solo business owners |
| Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
Can be for businesses with multiple owners |
| Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
Income is reported on business owner’s individual tax return |
| Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
Can apply for 501(c)(3) status in certain circumstances |
| Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
Businesses making at least 40K in annual profit may see a tax benefit |
| Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
Pays owner out a salary for services provided |
| Can issue stock |
Can issue stock |
Can issue stock |
Can issue stock |
Can issue stock |
| Double taxation applies |
Double taxation applies |
Double taxation applies |
Double taxation applies |
Double taxation applies |
| Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Must appoint a board of directors |
Tax implications for your business:
LLC income is typically reported on a business owner’s individual tax return. However, the number of owners an LLC has along with other factors ultimately determine how your LLC is taxed and how taxes must be filed. In fact, your LLC has the flexibility to be taxed as either a sole proprietorship, partnership, or corporation at the federal level.
Other considerations
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Can have owners who are not U.S. citizens or residents
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Most states will require an annual report filing
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Quarterly tax payments are generally also required
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Other formalities and requirements may be necessary depending on your state
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Unable to issue stock or become publicly traded
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Check out our resource center to learn more about taking your business from self-employed to an LLC, C Corp, or S Corp.