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Benefits of an LLC
- An LLC allows flexible ownership and management.
- The main advantage is limited liability protection for personal assets from debts and lawsuits.
- LLCs allow flexibility in management structure.
- Most new owners choose LLCs over corporations to benefit from disregarded entity tax status.
Tax Treatment and Management of an LLC
- Most single member LLCs are disregarded entities, taxed like sole proprietorships.
- No separate tax return is filed. Income and expenses are reported on the member’s individual return.
- This avoids double taxation and simplifies filing.
Protection and Structure of an LLC
- The operating agreement outlines everything. It protects owners like partners but taxes like corporations.
- If judgments exceed business assets, members’ personal assets can’t cover shortfalls.
- Owners, called members, share profits and losses. An LLC can have one or multiple members.
- LLCs shield personal assets from legal judgments against the business. If sued, personal assets are protected.
- Single member LLC taxes are simpler than multiple manager LLCs.
