What is an LLC?

December 28, 2022

Consider an LLC if you are a business owner, or real estate investor looking for liability protection, tax savings and flexibility.

Limited Liability Protection

Limited Liability Companies (LLCs) can protect business owners in case of a lawsuit. If the business is sued, the plaintiff cannot go after the personal assets of the LLC owner (also known as a “member”). Failing to use an LLC for a business can be catastrophic in case of a lawsuit. This is especially the case when a business has more than one owner. Under the principal of joint and several liability, one owner can sometimes be liable for all of the debts of a partnership if the other partner is unable or unwilling to pay.

Management Flexibility

LLCs offer excellent flexibility in terms of management. They can be managed and controlled in different ways. For example, LLCs can be either member-managed or manager-managed. This means that you can delegate power to certain people to manage the LLC while others can be passive investors.

Tax Flexibility

LLCs can be superior to corporations in terms of flexibility. For example, LLCs have the option of being taxed as sole proprietorships (if there is one owner) partnerships (if there is more than one owner), C corporations or S corporations. This tax flexibility can result in a lot of tax savings for your business. For example, using an LLC taxed as an S corporation can provide significant payroll tax savings (depending on income).

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If you need help setting up an LLC or other entity type, LawInc is here to help.

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