Why LLC is better ?

 What is an LLC ?

An LLC, or limited liability company, has become one of the top business entities for small and new companies. LLCs are more flexible than corporations, and it's easier to form an LLC. An LLC combines the limited liability benefits of corporations with pass-through taxation benefits that are exclusive to sole proprietorships and partnerships. As a result, forming an LLC creates a situation where business owners can take advantage of the best of both business formations.

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When you form an LLC, the business becomes a separate legal entity that exists apart from its owners. The only exception is in taxation since the taxes of an LLC are linked to the personal taxes of its owners. An LLC owner is called a member. LLCs can have one member or more than one member, depending on the needs of the business.

For those people who thinking to starting an LLC, here are some of the main LLC benefits.

1. Limited Personal Liability:  If your business is a sole proprietorship or a partnership, you and your business are legally the same "person." Your business debts are also your personal debts. And if your business partner or employee is accused of negligence, your personal assets might be at risk.

"An LLC limits it's personal liability because an LLC is legally separate from its owners."

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LLCs are responsible for their own debts and obligations, and although you can lose the money you have invested in the company, personal assets such as your home and bank account can't be used to collect on business debts. Your personal assets are also protected if an employee, business partner or the business itself is sued for negligence.

2. Less Paperwork: Corporations also offer limited liability, but they have to observe certain requirements that may not be well suited to a small, informally run business. For instance, corporations typically must hold annual shareholder meetings, make annual reports and pay annual fees to the state. They also tend to have substantial recordkeeping requirements.

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In contrast, LLCs don't have to hold annual meetings and usually are not required to keep extensive records. In many states, LLCs do not need to file annual reports.

3. Tax Advantages of an LLC: LLCs get the best of all worlds when it comes to taxation. LLCs don't have their own federal tax classification, but can adopt the tax status of sole proprietorships, partnerships, S corporations or C corporations.

The Internal Revenue Service automatically classifies LLCs as either partnerships or sole proprietorships, depending on whether they have one owner or more than one owner. This means that LLCs can always take advantage of "pass-through" taxation in which the LLC does not pay any LLC taxes or corporate taxes. Instead, the LLC's income and expenses pass through to the owners' personal tax returns, and the owners pay personal income tax on any profits.

4. Ownership Flexibility: S corporations enjoy pass-through taxation, but they have several ownership restrictions. For example, they can't have more than 100 shareholders, can't include foreign shareholders and can't have shareholders that are corporations. LLCs provide pass-through taxation without any restrictions on the number and type of owners they can have.

5. Management Flexibility: Corporations have a fixed management structure that consists of a board of directors that oversees company policies and officers who run the day-to-day business. Owners, also known as shareholders, must meet every year to elect directors and conduct other company business.

LLCs don't have to use this formal structure, and an LLC's owners have more choices about the way they run the business and make decisions.

6. Flexible Profit Distributions: LLCs have flexibility in the way they distribute profits to their owners, and they aren't required to distribute them equally or according to ownership percentages. For example, two people may have equal interests in an LLC, but they may agree that one of them will receive a greater share of the profits because he or she contributed more money or labor in the business's startup phase.

Corporations, on the other hand, must distribute profits to shareholders according to the number and types of shares they hold.

Here are some more benefit's which makes the LLC better rather than other's corporations.

• Protect your savings, car, and house.
• Increase your peace of mind.
• Protect your privacy.
• Allow for greater profit.
• Allow for accelerated growth.
• Increase credibility.

(Article sources from:https://www.legalzoom.com/articles/advantages-of-an-llc, https://howtostartanllc.com/form-an-llc/should-i-start-an-llc-for-my-business)

LLC is an easy form of business structures, because there's less paperwork. Low capital to start with anyone, and it's main features is a Limited Liability of the member.

You can contact us @ www.cpacb.com regarding any types of company registration and tax filling.