LLC

What is a LLC?

LLC is an abbreviation for "Limited Liability Company". An LLC is a form of business that is offers the owner(s) limited personal liability for the debts and actions of the company; similar to the personal protection that a corporation offers but without all the work a corporation requires.

For most people creating a business, a LLC is the business structure of choice. It provides legal protection similar to a corporation but required little work to maintain, similar to a DBA.

Below we are going to describe some of the different ways LLC are structured. See "How to create a LLC" if you are interested in learning how to create one.

Different LLC structures

Taxation consideration
Pass through entity or Corporation.

An LLC can be set up to be taxed as a corporation or as a pass through entity. Many people set up their LLCs as a pass through entity. This means the income from the LLC is passed onto the owner and the owner pays the taxes for the LLC when he/she pays their person income taxes. They do this because corporations have what is called "double taxation". If the LLC is set up to be taxed as corporation, then the corporation would pay taxes and any money that is paid to the owner(s) would also be taxed as person income tax.
Membership consideration
Sole Member or Partnership.

LLC owners are called members. Usually there is little restriction by the states as to who or what can own a LLC. This means owners (or members) can by one individuals, many individuals, corporations or other LLCs. Depending on which way you set up you LLC (Sole Member or Multiple Member), the taxes will by handled by either the business section of the IRS or the personal section of the IRS. Sole Member LLCs have their LLC income transfer through the entity to the individual's income taxes and the individual / household section of the IRS processes the taxes. This is done by the individual filing a Schedule C when they submit their person year end income taxe forms. The Taxes for partnership or multi-member LLCs have the taxes reviewed by the corporation section of the IRS, just like General Motors, General Electric, Home Depot, ect.