The business formation know as a limited liability company, or LLC, is easiest considered to be a mixture of a corporation and a partnership. Simply explained, an LLC give a business the good parts of a corporation without all of the corporate formalities.

The owners of an LLC, who are called member, are treated like a partnership for tax purposes. The LLC is a pass-thru tax structure, so income taxes are paid by its member, so the LLC never pays income taxes itself, unlike a corporation.

An LLC never worries about the double-taxation problem that a corporate structure does. In other words, due to the fact that the tax burden is put on only the owners, income tax is paid just one time. Though, a limited liability company is still obligated to pay state (assuming there is any) and federal payroll taxes.

At the time of LLC form, a decision is made about how you choose the tax treatment desired. You can be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.

If the LLC is properly set up, and you completely separate business and personal happenings, the members can look forward to certain personal liability protection. This potential protection is a big reason why people choose to form an LLC instead of operating as a sole proprietor. You should also consider that a company generally earns more admiration when it has a formal structure, such as a limited liability company.

Forming an LLC is done by a person who does not necessarily need to be an owner. There are actually several very reputable online companies that will create your LLC for a very reasonable cost, saving you from having to ensure the structure is properly set up.

Typically, a member’s financial liability is limited to the amount of money contributed by that member. And an LLC’s structure allows you to bring in multiple partners, who can be active in the business, or serve as silent investors.

While a limited liability company is similar in structure to a corporation, it allows more flexibility to its owners. Starting an LLC with an online incorporation service company is most suitable for a smaller business in which the number of owners is limited.

The limited liability company is a fairly new type of business entity, at least in the US. As a matter of fact, as early as 1986, you could create an LLC in only two states. Today, every state recognizes this business structure.