An LLC business, or limited liability company, is a relatively new form of business that has gained popularity due to certain advantages owners enjoy that are not available to partnerships and corporations. It is important to be careful to form the LLC properly, however, and to avoid certain pitfalls. A business lawyer in Bryan can help you set up your LLC and advise you on all matters pertaining to it.
How Does an LLC Differ from Other Business Types?
A limited liability company is something of a hybrid of a corporation and partnership. Like a partnership, owners possess flow-through taxation. This means that the taxes due for the business are reported on each owner’s individual tax return in accordance with his share of the business. In a corporation, there is no such flow-through taxation. The implication of this is that the corporation itself is taxed, and then the shareholders must pay an additional dividend on profits they receive. This is what is often referred to as “double taxation.”
What Are Some of the Advantages of an LLC?
One distinct advantage is that, though an LLC has flow-through taxation, owners are not held personally liable for debts owed by the company. This is in direct contrast to the partnership, where indebtedness passes on to the owners, meaning their own assets—homes, cars, etc.—can be taken by creditors.
Another advantage of the LLC is that it is relatively easy and inexpensive to form. This said, it is important to note that, to form the company, the owners must file articles of organization with the secretary of state’s office. They should also develop a written operating agreement. It is essential to have the latter so that owners maintain a common vision for the company and how it is to be run.
A Word of Caution
While it is true that owners in an LLC generally are not subject to unpaid debts of the company, there are exceptions. You can bring serious problems on yourself and the company if you do not act in good faith with vendors, creditors, and other businesses. Moreover, some owners make the serious mistake of not keeping their personal affairs separate from the LLC. Make sure to have a federal employer identification number (FEIN) and bank accounts that are in the name of the business.
For Help in Setting up Your LLC
While creating an LLC is much less difficult than setting forming a corporation, there are matters that are important to handle correctly, and thus it is advisable that you work with a Bryan business attorney. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.