What is an LLC? An LLC is a business structure that classifies your business as separate from you individually and allows you to run your business in a more professional manner than a sole proprietorship.
What are the benefits of operating my business as an LLC? An LLC protects your personal assets (like your home and personal bank accounts) from business lawsuits and debt, offers flexible tax options that allow you to avoid double taxation and gives you the ability to open business bank accounts, hire employees,and apply for business licenses and permits.
What are the specific tax advantages of an LLC? LLCs allow their business owners to pass profits and losses through to their personal federal tax returns, rather than paying first corporate taxes on the profits and then separate personal taxes when the money is distrubed from the business. LLCs can also elect corporate taxation by filing IRS Form 8832 if they wish to take advantage of lower tax rates or other tax strategies.
How does an LLC differ from S Corporations and C Corporations? Incorporation has more formal requirements (such as having to issue stock), fewer tax options, and requires a more complex management structure and annual reporting. LLCs also don’t have a requirement to file annual reports in most states.
What are the different types of LLCs? In looking to create an LLC, you can choose between single-member or multi-member LLCs, as well as between member-managed or manager-managed LLCs. Also there are holding LLCs for investment or passive activity as opposed to operating business LLCs.
A Professional Limited Liability Company (PLLC) is a type of LLC that can be used by certain professions that require licenses, like doctors or lawyers. While it offers many of the same benefits of LLCs, a PLLC is limited in who can form one, and, in some states, who can be a member. Typically states require most or all members of a PLLC to be licensed professionals, and some states may require licensed professionals to form PLLCs rather than LLCs. Importantly, PLLCs also don’t guard members against liability for malpractice.
Do I need an attorney to form an LLC? Having an experienced business attorney help you set up your LLC makes the process much faster and less stressful. Also, you will know your LLC was set up correctly and legally.
Do I need an LLC operating agreement? Many states don’t require an operating agreement for LLCs, but they are nevertheless crucial to have to avoid conflict or disagreements over the rules and operation of the company in the case of multi-member LLCs, as well as to ensure protection against personal liability.