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LLC: The essentials
Despite being a relatively new option for companies looking to more formally organize, the limited liability company (usually abbreviated “LLC”) is now one of the most popular business structures among smaller organizations. Organizing as an LLC generally grants the owners of the company a good bit of freedom in regards to regulation. It still provides personal asset protection, which means that the personal assets of the owner of an LLC cannot be collected to fulfill the debts of the business.
Pros and cons
It isn’t a surprise that the LLC structure is gaining popularity. As mentioned above, organizing as an LLC provides one huge benefit: personal asset protection. If your business doesn’t work out, it doesn’t have to mean your financial ruin. An owner of an LLC is protected from having their private assets ceased in order to pay the business’s debts. This does come with a caveat: An LLC only retains this protection as long as the owners of the business are in compliance with certain regulations.
As it’s a relatively new structure (as compared to a C corporation, for instance), there is little legal precedent when it comes to cases involving an LLC. Also, the freedom that ownership in an LLC provides is limited by the difficulty in transferring ownership of the business.
The tax benefits of owning an LLCs stem from how the government classifies the business’s profit. Owners are not taxed at a corporate level, they only pay personal income taxes based on the profits and losses of the company. This is commonly referred to as “pass-through” taxation.
Quick process overview
The first set of paperwork required to successfully form as an LLC is called the Articles of Incorporation (which is sometimes referred to as a Certificate of Incorporation). These documents typically contain basic information about the company, its owners, and its directors. Depending on the state in which you are located, there may also be some state-level fees or taxes that must be filed and paid.
After your initial filing is complete, there are a few ongoing requirements that you, as the owner of an LLC, must comply with. These requirements are much less stringent than those placed on an S corporation or C corporation, but they still must be completed. Each state has different specific requirements, but these generally include special fees, yearly taxes, and the filing of an annual report.
Swyft can help!
Many business owners are choosing to organize as an LLC. Does it look like a good option for you? The experienced professionals at Swyft can get your up and running ASAP. Contact us today!