A limited liability company (LLC) is one of many ways to formally structure a business. The best way to describe an LLC would be as a cross between a sole proprietorship/general partnership and a corporation. “The "LLC" has only been in existence for roughly 26 years and there are some definite pros and cons” (Chapo, 2007). Advantages of LLCs
There are many benefits to forming an LLC. They are easier and less expensive to start than other forms of business, but not every business type is allowed to form an LLC. Every state allows individuals to form an LLC by filing articles of organization, which typically only require the name of the business, its main location, the names and addresses of the owners and the name and address of its registered agent. “The entity is heavily favored because it provides liability protection from lawsuit judgments and business debts just like a corporation. On the other hand, the entity does not carry the legal requirements for running it like a corporation” (Chapo, 2007).
Members of LLCs can be individuals, other LLCs, corporations and even foreign entities. One person can form an LLC alone, and there's no limit on how many members an LLC can have. If you currently operate as a sole proprietorship or general partnership, you can fairly easily convert your business to an LLC by filing for a certificate of conversion in your state.
Although LLCs enjoy some of the benefits of corporations, they don't have all the paperwork and record-keeping requirements. They don't require annual shareholder meetings or a board of directors who can control the business. In most states, LLCs can choose how they want to be taxed, whether as sole proprietorships, partnerships or corporations. In most cases, LLCs are not taxed because they are treated like sole proprietorships or partnerships. Members report their LLC's profits and losses on their individual tax returns. Disadvantages of LLCs
Not every type of business...