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The Limited Liability Company: Meaning, Structure, And Benefits

The Limited Liability Company: Meaning, Structure, And Benefits

LLC or Limited Liability Company is a form of small business organization with:

  • liability-shield edges of a corporations
  • flexibility
  • tax pass-through edges of a partnership

Many countries allow a business called LLC, as it is a type of small business where some businesses are under this category. You may check out this site to know this corporate structure and how personally protects owners from any company liabilities and repayment company’s debts.

Starting Your Own BusinessUnderstanding LLC

A Limited Liability Company is a hybrid entity that combines the corporation’s characteristics with a sole proprietorship or partnership. The limited liability feature is the same as that of a corporation, flow-through taxation availability to the members of the LLC, a feature of partnership rather than a Limited Liability Company.

The facts of LLC

LLC is a corporate structure protecting the owners from personally pursued repayment of the liabilities and company’s debts. The regulation of LLCs will vary from country to country. Any individual or entity is possible to be an LLC member with notable exceptions of insurance companies and banks. The LLCs don’t pay taxes from profits directly.

The losses and profits are passed through to the members who report them on individual tax returns.

LLCs are permitted under state statutes and regulations governing them to alter from country to country. Also, the owners of the business are called “members”. Many countries don’t restrict ownership, which means anyone can become a member, including:

  • individuals
  • corporations
  • foreigners
  • foreign entities
  • other LLCs

Some entities can’t form LLCs, including insurance companies and banks. An LLC is a formal type of business arrangement, requiring articles of an organization filled with the country. It is easier to set up than the corporation and provides more protection and flexibility for their investors. Limited Liability Companies may elect not to pay direct federal taxes.

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Instead, LLCs’ profits and losses are reported on the personal tax returns of owners. LLC selects different classifications, like a corporation. When fraud is detected or when a company fails to meet the reporting and legal requirements, the creditors can go after the members.

How to form an LLC?

Even though the requirements for Limited Liability Companies vary in every state, with some commonalities. The first thing that members or owners should do is choose a name.

Articles of organization are documented and filed. The articles will establish these factors:

  • Rights
  • Powers
  • Duties
  • Liabilities
  • Other obligations

Other information may include in the document including the name and address of the LLC members.