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The Benefits of Forming an LLC

A Limited Liability Company is a business structure formed loosely on a German style of business called GmbH (legal abbreviation) and literally means limited liability. The concept spread throughout Central Europe and in 1997 the first LLC was shaped in Wyoming. The Internal Revenue Service ruled one way and then another, making regulations unclear until 1988 when they ruled to treat multi member LLCs as partnerships and single member LLCs as sole proprietorship’s for tax purposes. Nearly ten years later, all states had LLC statutes and the Uniform Limited Liability Company act was adopted. LLCs are currently the most popular form of business entity. Note that laws vary from state, and you need to be familiar with those in your state.

There are advantages to starting an LLC. For one thing members may be individuals, other partnerships; they may be non-resident aliens or a trust. This allows for more flexibility for the company formation. Distributions need not be equal. If one member invests more or contributes more to the business, that member may reap more of the profits. The agreements of disbursement are stipulated in the LLC operating agreement. Additionally, there need be no organized meetings and minutes, often an unnecessary formality for a small business. Taxes “pass-through” the company, and the individual members are taxed at an individual levels and not the company level according to their profits or losses. While LLCs file tax returns, the company does not pay federal income tax. Consequently, administrative paperwork and accounting are simpler for an LLC. Perhaps the most important advantage to LLCs is that it provides liability protection to the business owners, since owners are considered separate entities from the LLC. Personal assets are not connected to the company if the LLC is in litigation.

You might wonder, “Can anything be simple”? Well, yes, with the proper help some things, like forming an LLC, can be made quite simple. Knowing where to look may be the hardest task. You can hire a lawyer to guide you through the process of an LLC formation, but expect this to be costly. Using an online incorporation company is another option. Online incorporation companies will guide you through the process. Look, to incfile.com for help when filing for a LLC. With their help, the process can be made quite simple. An online incorporation company such as incfile.com will process the paperwork with the state of formation as well as file any necessary IRS forms.

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