The major benefit of an LLC is obvious: restricted liability protection. When an owner utilizes an LLC to do business, his or her personal assets are insulated from corporate obligations and litigation. An LLC can have one or more owners (known as “members”). An llcratings.com  can be formed by both businesses and individuals. Other conventional company structures, such as corporations, general partnerships, and sole proprietorships, have different benefits, but the LLC entity incorporates the benefits of each structure.

In addition, LLCs offer greater tax flexibility than other business structures. LLCs are taxed as either a sole proprietorship or a partnership, depending on whether there are one or more members. Members declare their share of company revenue and costs on their personal tax returns, and earnings are taxed at the individual level. Members who work in the business are deemed self-employed and must pay self-employment taxes (Medicare and Social Security) on their profits.

If the LLC does not want to be treated as a sole proprietorship or partnership, it can choose to be taxed as an S-corp or C-corp. Because of corporate taxation, LLC owners can be compensated as firm workers, participate in company benefit plans, and potentially save taxes. A C-corp pays corporation tax, and its shareholders pay tax on dividends. An S corporation is a pass-through firm, which means it does not pay corporate tax but instead pays personal income tax on its profits.

Flexibility

LLCs are not obliged to have annual shareholder meetings or to have a board of directors, and they are not subject to the administrative restrictions that corporations are. Instead, the members of an LLC can structure themselves however they see fit: Members or managers may handle the activities of the company as they see suitable.

Authenticity and Legal Name

State law often prohibits forming a new business with the same name as an existing one. When you form an LLC, you get the exclusive right to use your name as a business entity name in your state, as well as the creation of a public record of your use of the name. The LLC designation at the end of a company’s name can also help small firm gain legitimacy.