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Benefits an LCC
A Local Liability Company (LLC) is a type of hybrid that combines the operational flexibility of a partnership with the limited liability and tax efficiency offered by entities such as C and S Corporations. The benefits an LLC can offer will normally suit the small business owner best. The LLC is considered one of the easiest ownership arrangements to set up within the United States, and it is also comparatively inexpensive.
An LLC can be formed in all 50 states, plus the District of Columbia. The preferred state in which to form your particular LLC can vary and your home state is not automatically the best choice. Each state constructs its own incorporation laws and tax policies and the exact benefits an LLC can offer will therefore vary. For companies doing business in several states, Nevada and Delaware are currently two of the most popular states to form LLC:s. The four major benefits an LLC will offer:
- As an owner (member) you will normally only have a limited liability for acts carried out and debts acquired by your LLC. Creating an LLC is therefore popular among sole proprietors who wish to safeguard their own private assets and/or secure additional loans.
- Since your LLC is not a separate taxable entity, you will avoid double taxation. In an LLC, profits and losses are passed through to the members. This means that the company is never taxed, only the members. The system is very flexible so if you want to have your company taxed instead, you simply file the IRS Form 8832. An LLC can always choose to be taxed as a sole proprietor, a partnership or a corporation.
- In an LLC, the allocation of profits and losses do not have to be proportional to ownership interests. In many other forms of enterprises, disproportional allocation of profit and loss may lead to severe tax repercussions. For many business owners, this is one of the most important benefits an LLC have to offer.
- You can own and/or invest in an LLC even if you do not have a US citizenship.
A few other examples of interesting benefits an LLC will offer:
- The LLC was designed to keep the amount of mandatory recordkeeping and necessary administrative work as low as possible.
- There are several noteworthy benefits of an LLC when it comes to setting up and managing a small-scale business or any other business where you wish to keep most of the control and be personally involved with day-to-day management. There are for instance no mandatory annual general meetings for shareholders and you do not have to give up power to a board of directors.
- Unlike many other business entities, it is possible set up an LLC without involving any other natural persons in your enterprise.
- When the sole proprietor of a business have to step down, e.g. due to health reasons, business termination can prove to be quite a hassle. By setting up an LLC, you assure that the business will endure legally even without the owner. Legally speaking, a corporation is a viable entity even if the owner gets seriously ill or dies.
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