Filed under: What Does LLC Mean
LLC stands for Limited Liability Company, a type of organization that combines some of the corporation features and those of a partnership or sole proprietorship. Main features of a LLC make her a very accessible, expedient way to organize a small or medium business. Another type of LLC is Single Member Limited Liability Company.
The personal liability (as the name says) of the members of a LLC for the business’s debts is limited, like in a corporation, but, unlike corporations, LLC is not taxed as a separate entity. The owners of a LLC are called members, and those members can be individuals, but also other LLC or corporations. The LLC doesn’t have a special classification for tax paying and, if it’s not automatically classified as a corporation can file as a partnership or sole proprietorship tax return. The main advantage of LLC is that it allows to individuals to operate a business and in the same time not to put in danger their personal assets. In the same time, an LLC doesn’t have the complexity of a corporation- it can be managed easily and doesn’t involve shareholders.
For small business, there is also a debate whether to go as a sole proprietorship or as a LLC. If you choose to organise your business as a LLC entity, in case of bankruptcy you won’t need to worry about your personal finances- they won’t be caught up in the business problems. The sole proprietorship, on the other hand, holds full responsibility for the business debts and, in case of bankruptcy, his personal assets and his credit score will be affected. From that point of view, the LLC seems like a winner. In certain cases however, it just doesn’t worth to organise your small business as a LLC. Although the paperwork for creating an LLC business entity and handling its taxes is far less complicated that in case of corporation, compared with a sole proprietorship or partnership is much more complex. The choice between a LLC and a sole proprietorship or partnership needs to be taken after you talk to your accountant and after considering both advantages and disadvantages of this type of organisation.
The LLC is very flexible types of organisation, which can help you do business in a professional way, without having to worry about putting at risk your family. The limitation of the liability is the main characteristic that makes this business entity so attractive. You can do your business and take the kind of risks necessary for growth without being worried about your personal assets. Practically, changing from sole proprietorship or partnership to LLC is the next step for your business: you’ll have a little more space to juggle, and still keep a decent level of paperwork and tax handling.
Almost any type of business can be organised al a LLC. There are some differences from state to state, but certain business, like banks, can’t be registered as LLC. However, you’re going to need to check the legislation of the state where you want to establish your LLC.