Have you ever shopped at a small business or started your own business? Chances are, you’ve interacted with or used an LLC!
A limited-liability company, or LLC, is a type of business structure that is distinctly separate from its owners. Like corporations, LLCs are popular among entrepreneurs and business owners.
Instead of being referred to as “shareholders,” as they are in a corporation, LLC owners are referred to as members. LLC members are not personally responsible for any business debts, meaning their personal assets cannot be seized to pay business liabilities. This is a major reason why the LLC structure is very popular.
Unlike corporations, LLCs are not subject to double taxation. In a corporation, income is taxed at the federal level and through dividends. However, LLC members “pass through” the businesses’ income to their personal income tax returns, avoiding double-taxation. This is another reason why LLCs are popular.
LLCs are relatively cheap and easy to form. They can usually be filed through the Secretary of State’s office in your state.