In today's world, statistics show that we will each be sued at least two to three times during our lifetime. Business owners and professionals have a one in three chance of being sued during the next year alone. A new lawsuit is filed almost every 30 seconds with nine out of ten lawsuits in the world being filed in the United States.
We tell our clients that it's not a matter of IF you get sued, it's WHEN. The real question is... What are you going to do about it?
One good way to protect yourself while doing busines is to properly form and operate a Limited Liability Company (referred to as an LLC). A LLC is a type of hybrid business structure that is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. A popular choice for sole proprietors who are looking to incorporate simply to protect personal assets or secure additional loans, the LLC is thought to be one of the easiest and least expensiv
An LLC Is a Recognized Business Structure in All 50 States
The Limited Liability Company (LLC) is now a recognized business structure in all 50 states plus the District of Columbia. LLCs are gaining popularity with small business owners because they combine the advantages of a corporation with the tax advantages and management flexibility of a partnership.
What are the main advantages of forming an LLC?
Owners of an LLC have limited liability for business debts; For tax purposes, the allocation of profit and loss of an LLC need not be proportional to ownership interests; With an LLC, there is no double taxation threat since the LLC is not a separate taxable entity; You do not need to be a US citizen to own or invest in an LLC.
The Main Differences Between LLCs and Corporations Are:
The main differences between LLCs and corporations are:
Corporations issue stock and are owned via stock. LLCs do not issue stock; Like partnerships, LLCs are simply owned by the members and/or the managers of the company; Corporations are required to hold annual meetings and to keep written minutes. LLCs do not have this requirement, resulting in less official paperwork. Corporations are taxable entities, and (except for Subchapter S Corporations) they must pay taxes on their profits at the corporate tax rate. LLCs, like sole proprietors, partnerships and S Corporations, are "pass-through" tax entities. This means that the profit or loss generated by the business is reflected on the personal income tax return of the owners, thus avoiding the double taxation of paying first corporate tax on profits and then personal income tax on distributions of profits.
Other Differences Include the Following:
Because of their flexibility and relative simplicity, the LLC is well suited for both start-up businesses and more mature businesses. LLCs have been gaining speed in recent years. In fact, new LLC formations now out-number new corporation formations in several states. LLCs have several "ease of use" advantages; LLCs provide greater management flexibility than do corporations. For instance, corporations are required to have a formal structure with directors and corporate officers. LLCs are simply run by the members and/or managers; LLCs provide greater flexibility with regard to income distribution than do corporations; When corporations pay dividends, those profits must be distributed evenly on a dollar per share basis. LLCs may distribute income as desired if a small business is interested in "pass-through" taxation, then LLCs have an advantage over S Corporations with regard to ownership flexibility; All shareholders of S Corporations must be citizens or permanent residents of
When Would an LLC Not Make Sense?
When would an LCC not make sense? Corporations issue stock and LLCs do not. Corporate ownership is most easily transferred using sale of stock. If your business intends to sell shares of stock to investors or if a public stock offering are in your plans, then an LLC may not be right for you.