A Limited liability company (LLC) is an entity that is separate from its owners Entity like this is made for businesses so owners cannot typically be held personally responsible for the business debts and liabilities if any.
At the same time, LLC allows pass-through taxation, meaning its income is not taxed at the entity level. Pass-through taxation is when LLC doesn’t pay taxes as a business entity and instead the responsibility “passes through” to the owners. So the owners or members can then submit income or loss on their personal tax returns and pay the required tax.
LLC is better than sole proprietorship or partnership and even a corporation depending on the scenario. First, the owner is shielded from personal liability, meaning their personal assets will be safe. Also, LLC allows for flexible membership and there is no limit on the numbers unlike s corporation for example. Additionally, it allows pass through taxation as we explained. Lastly, it has limited compliance requirements, meaning fewer imposed requirements by the government.
The biggest cons regarding is simply the paperwork involved with transferring the ownership when you sell the company. However, there are numerous online websites that can make this process a lot easier with low cost.
If you have any business that is generating income, it’s recommended to register it as a separate entity to protect your own assets. Online businesses like a blog, youtube channel, or ecommerce are popular for registering as LLC.
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