10 Key LLC Facts for Businesses

You may be familiar with several businesses that have formal names ending with the acronym LLC. And you're likely aware that LLC stands for limited liability company. Here are 10 key insights that may enhance your understanding of LLCs.

10 things about an LLC

An LLC, or Limited Liability Company, is a business structure that offers the flexibility and simplicity of a sole proprietorship or partnership, while also protecting limited liability similar to a corporation. This means that the personal assets of the owners are typically safeguarded from any liability related to business debts or legal issues.

1. Forming an LLC typically involves filing articles of organization with the Secretary of State in the state where the LLC will be operating.
2.  LLCs can be member-managed or manager-managed. In a member-managed LLC, the members directly manage the business. In a manager-managed LLC, the members elect managers to run the business on their behalf.
3. Ownership of an LLC is divided into units of ownership called "memberships." Members' ownership rights and responsibilities are outlined in an operating agreement, which is a legal document that governs the internal affairs of the LLC.
4. LLCs are considered pass-through entities for federal income tax purposes.
5. Several benefits to forming an LLC, including limited liability protection, pass-through taxation, flexibility in management structure, and relatively simple formation and maintenance requirements.
6. An LLC may be a good option for businesses that want to limit liability protection for their owners, have flexible management options, and avoid double taxation.
7. There are other alternatives to an LLC, but the choice will depend on the type of business you are going to manage. Seek legal advice from a professional.
8. LLCs can be dissolved voluntarily by the members or managers, or involuntarily by a court order.
9. Members can contribute various assets to the LLC, including cash, property, and services.
10. LLCs are required to maintain certain records, such as meeting minutes, financial statements, and membership records.

• Each state has its laws governing LLCs.
• Consult with an attorney before establishing an LLC. A CPA firm will handle all of the LLC's tax returns and plan tax strategies to reduce your business's tax burden.
  
  

Advantages and disadvantages of an LLC

The table below outlines the advantages and disadvantages of using an LLC structure.

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