If you are starting a business, one of the first things you need to determine is your business structure. Currently, one of the most popular structures is the LLC due to its ease of use, protection, and simplicity. Similar to a corporation, an LLC or limited liability company, is a distinct and separate legal entity. This means that you could open bank accounts, get a TIN, and operate your business, all under your LLC.
Main Features of a Limited Liability Company
An LLC is essentially a business entity that’s separate from the owners, similar to a corporation. Unlike corporations, however, that pays for their taxes, LLCs are pass-through tax entities, which means that the business’ losses and profits pass through the LLC’s owners who must be the ones to include them on their tax returns, explains a renowned business lawyer from Miller & Steiert, P.C. in Denver. Forming and operating LLCs is also easier than forming and operating corporations because they’re not bound by the same stringent rules that corporations are. You won’t need to maintain extensive records, special meetings, and other formal business proceedings.
All owners of an LLC are safeguarded from personal liability for claims and debts. In general, this means that if the LLC fails to pay a creditor, as a landlord, lender, or vendor, the creditor won’t be legally able to come after the owners’ personal assets or possessions. And since only assets owned by the LLC could be utilized for repaying the debts, the members stand to lose only the funds that they have invested in the business. This feature is what’s referred to as limited liability, hence its inclusion in the name.
The Importance of Seeking Legal Advice
It’s immensely vital to note that because the LLC business structure is considered a relatively new type of entity for businesses, state and federal governments are intent on finding ways to make LLC regulations more stringent. The main reason for this is that there are unscrupulous investment promoters that utilize LLCs to circumvent securities rules. With being said, it is imperative that you consult an experienced business lawyer and accountant when deciding which business structure might be the most suitable for you.