When it comes to choosing the right business structure for your business, the LLC is worth consideration. Not only does it make it possible to be a shareholder if you’re not a US citizen, but there’s also no limit to the number of shareholders you can have.
Personal Protection
But that’s not even the best part. As the owner of an LLC, your personal assets are protected. Should there ever be legal judgments or if your LLC incurs debts or liabilities, creditors can’t touch anything that belongs to you personally.
Pass-Through Tax Treatment
LLCs get what’s referred to as “pass-through” tax treatment, meaning that you as the owner report profit and losses on your personal income tax. There’s no separate tax filing for your LLC. This not only simplifies your LLC paperwork, but it also saves you money!
Fewer Formalities
Some people find that the S corporation is a bit rigid in its rules and requirements. The LLC, however, doesn’t require the regular Board meetings or even having a Board of Directors, the way an S corp does.
Flexible Allocation of Profit and Loss
When you’ve got multiple shareholders in your LLC, you can allocate profits and losses amongst yourselves however you want. You don’t have to allocate them in proportion to ownership, the way you do with a corporation. So if you have some shareholders who are more involved in the day-to-day at your business, you can allocate more shares to them than those who are less involved.
Types of LLCs
There are several types of LLC formations to consider.
- Single Member LLC – If you are the only owner of your LLC, you’d file as a Single Member LLC. This formation is treated like a sole proprietorship by the IRS, and personal assets aren’t protected.
- Multiple Member LLC – Just like you’d guess, this is used when there is more than one owner.
- Member Managed LLC – This LLC is run by the owners of a company, and is the typical LLC format.
- Manager-Managed LLC – This one uses a separate manager, who is in charge of daily operations, rather than owners.
- Domestic LLC – A company that registers as an LLC in the state where it does business is considered domestic.
- Foreign LLC – A company that registers in a state other than the one it does business in, it’s foreign.
- PLLC – This is a professional limited liability company, and is used by individuals who operate as certain types of professionals that require a license, such as a doctor or lawyer.
Learn more about the various LLC types with these helpful articles:
- LLC Business Structures
- Limited Liability Partnership (LLP)
- Professional Limited Liability Company
- Domestic LLC vs. Foreign LLC
- Member-Managed vs. Manager-Managed LLC
- Single Member vs. Multiple Member LLC
If you’re a freelancer or simply like the idea of fewer hoops to jump through, let CorpNet help you form an LLC. Our 100% Money Back Guarantee means you’ve got nothing to lose! Contact us to get started.
