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What is an LLC?



Starting a new business is always inspiring. It’s exciting to be the one in charge of your own destiny, setting goals and making decisions without having someone else looking over your shoulder telling you what to do. You are responsible for every success or failure that comes about because of the choices you make. And it can be very fulfilling when something goes right, even if it was hard work and not luck. But starting a new business also involve legal and financial expects and LLC is probably the main one. In this article we will cover:


What is an LLC?

Who need an LLC?

Benefits of an LLC?

Disadvantages of an LLC?

How to start an LLC?


You'll also learn about some of the most crucial words and phrases you should be familiar with, as well as go over some other terms that are important to know as an owner of an LLC.


What is an LLC?


An LLC is a legal entity that operates similarly to a corporation in many ways but also has some key differences. An LLC can be defined as a body with legal personality separate from the individual rights of the owner(s).

LLC stands for a "Limited Liability Company" as the name suggests it offers a "Limited Liability protection,” this is a legal business structure that allows an individual business owner, or two or more owners as the case may be, to own and operate a business while protecting the personal assets of all the owners. An LLC have a lot of benefits and can be formed for multiple purposes for example to hold real estate, vehicles, boats, aircraft, machinery, and other physical assets. LLCs are extremely popular among investors because they give the same limited liability as a corporation, but they're simpler and less expensive to start and operate.


Who need an LLC?


Any person looking to start a business or already operate one as a single proprietor should consider creating an LLC. LLCs may be used for any sort of business, from sole proprietorships to enterprises with many co-owners. Rentals and commercial properties are frequently owned using LLCs.


Benefits of an LLC?


LLCs are the most popular business entity among small business owners because they are simpler and more flexible than other business structures, and offer two main benefits:


​Personal Asset protection

The main reason behind forming an LLC is protecting business owners and their personal assets from the business liabilities and business debts. LLC`s owner`s personal assets include all of a owner`s asset , such as their home, other real estate, bank and retirement accounts, vehicles, family heirlooms, jewelry, etc. Personal liability is a big concern among business owners and a legal entity can surly provide protection for owners personal assets.

Unfortunately, many business can reach a struggling point at times but If a business undergoes a real hardship, or a legal dispute arises and a business is sued and the business finances are insufficient to cover the debt or reach a settlement with the litigating party, creditors can only pursue the assets of the LLC to settle the debts and liabilities. Because the owners have no personal responsibility and their personal assets are kept separate from the company's assets, their belongings will not be harmed in any way. The business assets, on the other hand, will be affected, and only the LLC's resources will be used to repay its LLC's debts.

Pass through taxation

An LLC also called a disregarded entity, it's one of the least complex entity structures and provides tax simplicity while allowing Limited Liability protection. Most of the Business entities in the united states are Passed through entities. Actually, more than 90% of them. Pass through taxation means that an LLC pays no taxes on the income it generates as an entity by itself, unlike corporations that faces double taxation. All the LLC's income including all credits and all deductions from the business are “passed-through” to the LLC owners, and the owners of the LLC pay the taxes on the business income on their own personal tax returns and at their individual income tax rates. Pass through taxation as the name suggests for federal tax purposes the tax responsibility is being passed to the ownership.


Profit Distribution

Another advantage of establishing an LLC is how profit taking is handled. LLCs have the advantage of distributing profits among its members whenever and however they see fit. Please keep in mind that as pass through taxation entity you will pay the Taxes on th LLC income on your personal tax return whether you distributed the LLC's profits or not the llc owners pays for the profits of the limited liability company llc. In contrast, a C corporation pays taxes on the profits earned by the entity, but the ownership will only be charged with income taxes on the actual amount distributed to them.


Disadvantages of an LLC?


There are mostly 2 main disadvantages for owning an LLC:


LLC cost:

There are formation fees and annual state fees that are assessed, and these can add up over time. In some cases, it may be more expensive to operate as an LLC than to operate as a sole proprietor or have a partnership


Raising money from investors:

LLCs are not ideal for entrepreneurs searching for outside investment. This is especially true if you're seeking venture capital funding, which typically only goes to corporations. Outside investors prefer corporations since stock may be issued in exchange for money invested by investors. Outside investors can invest in LLCs and acquire LLC ownership interests, but this may be more difficult than with corporations.


How to start an LLC?


With BusinessRegistration, it is very easy. You only need to fill up our form and we will take care of it. We will form your LLC for free; you will only have to pay for the state fees. BusinessRegistration will not keep any of those fees; they will be paid to the relevant government agencies in order to form your LLC.


More terms you should be familiar with :


Articles of organization

Once you form an LLC you will receive the Articles of organization this is a document that provides the members of the Limited liability company a legal and binding statues. The Articles of organization includes information such as the name of the LLC and the name of the LLC owners, nature of business of the entity, who has been granted membership, physical address where the business will operate from, and more.


LLC ownership