What is a Limited Liability Corporation (LLC)?

A Limited Liability Corporation (LLC) is a U.S. business structure that protects the owners from personal responsibility for their debts or liabilities.

An LLC is a kind of hybrid entity wherein it combines the characteristics of a corporation with those of a partnership and or sole proprietorship.

Characteristics of an LLC

Flexible Tax Benefits– Using an LLC, one has the option to choose the kind of tax structure to use whether as a partnership, corporation, or as part of the owner’s tax filing.
Limited Liability– LLC members are only responsible for their own and are not held responsible for any actions such as torts and civil wrongs done by other members of the corporation.
Simple Operation and Formation– LLC can help you to form and operate the business in a more formalized manner. Unlike, corporations, you don’t have to form a board of directors or do annual meetings. You can also increase professionalism by acquiring a company/organization instead of doing business as XYZ.

Advantages of an LLC

The members of the LLC’s assets are protected from business debts and liabilities.
There is a flexible management structure where members can either manage the company by themselves or have a manager.
The business profits and losses are reported on the owners’ tax returns, avoiding double taxation at both the corporate and individual levels.
An LLC has few formalities and reporting requirements.
An LLC has no set number of members/ owners and no restrictions on who can be a member.
An LLC offers a more flexible and customized profit-sharing arrangement.
An LLC requires minimal paperwork.
An LLC offers a sense of professionalism and credibility to clients, customers, and business partners.
An LLC offers easy transferability of ownership.
An LLC can offer a level of asset protection for members’ assets in the event of financial difficulties.

Disadvantages of an LLC

An LLC is typically tied to a specific duration like the departure of members which may be a disadvantage if you want to extend the business indefinitely.
Because it offers flexible taxation, an LLC may face complex tax rules.
LLC laws per state are different from each other it may be difficult to open multiple LLCs in different states.
An LLC may have difficulty in raising capital through the sale of stocks since most investors prefer more structured securities regulations of corporations.
Investors and businesses may perceive corporations as more credible and established than LLCs.