The acronym LLC stands for Limited Liability Company. A limited liability company is one of the many formal business structures that exist in the USA. It’s simply a business structure with one or more owners known as “members”. A limited liability company with a single member is called a single-member LLC whereas that with two or more members is called a multi-member LLC. There is no maximum number of members for an LLC, so members could be as many as possible. Examples of common limited liability companies include eBay, IBM, Nike, Sony and Pepsi-Cola.
Here in the USA, different states have different regulations for operating a limited liability company so it’s imperative to check with your state before establishing an LLC. Most states do not restrict the ownership of an LLC to a particular group of people, so members may include individuals, foreign entities, corporations and other limited liability companies.
An LLC business structure has several advantages. First and foremost, limited liability companies offer personal liability protection to their members in the event of unforeseen circumstances such as when the company suffers a loss. Indeed, an LLC prevents its members from being held liable for the debts of the company. This means that the personal assets of LLC members cannot be pursued in events where the company goes bankrupt or is being sued by an individual or entity.
An LLC can also benefit from a flexible tax structure since profits go by default directly to the members who in turn report their shares of the profits on their tax returns in what is known as pass-through taxation. This, therefore, means that limited liability companies are taxed only once unlike corporations that are taxed double.
It is also a lot easier to start a limited liability company than other business structures like a corporation because less paperwork is needed. The major essential things you will be needing to start your own LLC include the name of the business, an LLC registered agent, the articles of organization, an LLC operating agreement and an Employer Identification Number (EIN) which helps identify the business entity.
Another benefit of a limited liability company is the fact that the business structure appears more credible to both customers and creditors, making it possible for the business to grow bigger within a short period.
Above all, starting a limited liability company is relatively affordable when compared to other forms of business like a corporation. The main cost you need to incur when obtaining an LLC is the state filing fee which varies from state to state, but ranges from about $40 to $500. More so, forming an LLC does not necessarily require you to hire an attorney, but it’s up to you to make that decision.