Should Your Business be a Limited Liability Company?
An LLC, or limited liability company, can be considered to be a marriage between a corporation and a partnership. Basically, with an LLC you get many of the same benefits that a corporation enjoys, without the majority of the formalities that come with a corporation.
The multiple owners, called members, of an LLC get treated like a partnership for tax purposes. It passes through taxes on income directly to its members, so, unlike a corporation, the LLC itself never pays taxes.
Income from an LLC is taxed only once because it passes straight through the business, onto the owners. Therefore, an LLC does not suffer from the double-taxation issue that a corporation deals with. But, an LLC still pays any payroll taxes required by the federal and state governments.
The way that income taxes are paid by you, as a member of an LLC, is decided when you initially set up the LLC. You choose between taxed as a C corporation, an S corporation, or as a sole proprietor. The beauty of an LLC is that you get to decide how you are going to be taxed.
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