1. Definition of a Limited Liability Company or LLC
Like a corporation, a limited liability company or an LLC, is a separate and distinct
legal entity. This means that an LLC can obtain a tax identification number, open
a bank account and do business, all under its own name. The primary advantage of
an LLC is that its owners, known as members, are not personally liable for the debts
and liabilities of the LLC. For example, if an LLC is forced into bankruptcy, the
members will not be required to make up the difference with their own money. If
the assets of the LLC are not enough to cover the debts and liabilities, the creditors
cannot look to the members, managers or officers for recovery.
An LLC can be taxed either as a "pass-through" entity, like a sole proprietorship
or partnership, or as a regular corporation. By default, an LLC is taxed as a pass-through
entity, and the owners of the LLC are not subject to double taxation. This is different
from a regular corporation, which pays a corporate tax on its net income (the first
tax). Then, when the corporation distributes profits, the stockholders pay income
tax on dividends (the second tax). With an LLC, the profits "pass through"
to the owners who pay taxes at their individual tax rates.
To learn more and speak with a representative, please call us at (888) 381-8758.
We are happy to answer any questions you may have.
