Limited Liability Company – An Overview

Operating a business is not as easy as many entrepreneurs would like you to believe. It takes a lot of hard work and dedication to be successful. The basic business structure is also known as the partnership or the business entity.

Limited liability company is one of the simplest business structures that offers several advantages over other business structures. It can save a lot of cash because you don’t have to pay for management fees, property taxes and income taxes. In addition, there is very little or no need to deal with stockholders or creditors. Your personal assets are protected because only the equity is owned by you and the rest of the ownership is protected by the LLC operating agreement.

With limited liability company, business owners can have access to the capital and financing they need very easily. They don’t have to wait for approval from banks or other lending institutions because they are required to use their own money for their business expenses. All the money goes into the LLC. This is also called as pass-through business structure and is very popular.

Aside from that, a limited liability company does not pay any income tax at all. The reason why it is popular with small business owners is that there are still a lot of advantages that they can enjoy even with limited liability. Most small businesses fail because owners are not aware of tax benefits that they are entitled to. A limited liability company also offers a great way to protect and preserve the assets of owners. Owners can avoid paying taxes on their net profit. This allows them to maximize their profits so that they can invest more in their companies.

When a business buys shares or other ownership rights from other people, they are required to pay income taxes according to the rate stipulated by the government. But a private limited company is completely tax free. It is also able to deduct expenses and state taxes. All these benefits offered by a private limited company are made possible by the pass-through taxation system.

With pass-through taxation, income is only taxed when the income is earned and not when the owner receives it. So if you buy shares from a company and just sell it a few months later, your tax liability will be zero. Because of this, the number of people who actually have any interest in starting their own businesses is quite low. There are many ways on how to set up a limited liability company. One of which is by using an LLC.

An LLC in the United States has to follow all the necessary rules and regulation just like any other business entity. There are many laws governing the transfer of real estate, the purchase and sale of stocks, the financing of loans and the naming of the members of the LLC. Once the business is established, all these things have to be taken into account by the courts. So for the LLC to become operational, all these things have to be complied with.

As an alternative to a sole proprietorship or a partnership, there exists the limited liability company. This legal entity does not allow the partners to be treated as officers and there is no need for annual general meetings. An LLC is also preferable for people who do not want to have to pay the corporate tax.

It is the job of the limited liability partnership to pay the income taxes and pay the expenses. The owners can divide their earnings between themselves and can use the money in any way they want. All their losses are the responsibility of the business and if the owners make no profit, they have to pay the cost of operations and the income tax. However, if the owners make a profit, they can divide the profits among themselves and take their share.

Limited liability companies do not have to pay inheritance taxes, although it is recommended that they pay this particular tax since they are considered as personal property. They also have the advantage of avoiding debts, because they have the ability to create an abstract of the debts. The abstract is not payable, but when an order for payment is made, the llc members have to pay only the amounts stated in the abstract.

There are many differences between the limited liability corporations and the corporations. However, both have similarities that allow the businesses to benefit from taxation. Both entities must pay taxes and pay the necessary expenses. Moreover, both have the obligation to pay the income taxes and the inheritance taxes, although the corporations have more advantages like paying only the necessary taxes. The only disadvantage of doing business in a limited liability company is its disadvantageous nature. Because of the limited liability, the owners cannot have a say on the management or control over the business.