A LLC (Limited Liability Company) is a relatively new way to give your business flexibility and tax advantages while maintaining a limited liability benefit of a corporation. It is similar to a corporation in the fact that an LLC is a separate legal entity that limits the liability of all the members involved. However it has some of the same tax benefits of a partnership at the same time.
One of the benefits to an LLC is that they are free from many of the legal requirements that govern many of the corporation structures such as annual reports, board of director meetings, and shareholder requirements just to name a few. In addition, LLCs are considered to be a “pass through” tax entity, which means that the profits and losses of the company are passed through the business. They are taxed solely on the member’s individual tax returns as opposed to being strictly on the business.
Incorporating into an LLC offers more advantages to small business owners than incorporating in other ways. As a small business owner you can hire a management company to run the LLC which can consist of members, non-members, or a combination of both. The profits and/or can then be split among the members any way that they decide so there can be more of a one sided share depending upon how you want to divvy it up.
In normal corporations the dividends are usually equally distributed giving a specific amount to each stockholder in the company. As an LLC if there is one person doing most of the work, and holding most of the shares then they can take a larger profit then others who are just there to help you along your way. Most states allow one person LLCs which other corporation structures do not. However, if you do have more members an unlimited amount may join your LLC if you choose.
Unlike an S corporation, an LLC may also affiliate with any other business of its choosing, which is a benefit that you may not even be aware of but could definitely work to your advantage later on.

As with any incorporation structure, there are disadvantages to incorporating as an LLC. You may be filing in a state that imposes income or franchise taxes on LLCs. You may also be required as an LLC to pay annual fees to operate in other states. It may be more difficult to raise money for an Limited Liability Company, as investors may be more comfortable investing funds in the better-understood and known corporate form with a view toward an eventual IPO.

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