Small business planning includes the option of selecting the limited liability company (LLC) as the business entity. LLCs are commonly used for small businesses such as sole proprietorships and professional practices (such as those of the accountant, lawyer, or doctor.) The LLC is an essential part of small business planning in all fifty states as well as the District of Columbia.
The Best of Both Worlds: Partnerships and Corporations
The LLC pulls its tax benefits and operational flexibility from the partnership and its liability protective structure from the corporation. It is, in a sense, the best of both worlds.
The Limited Liability Company has Simplicity
The LLC is used often in small business planning because it is simple to set up and simple to run. Even the taxes are simple as the LLC is a pass through entity so the taxes are reported on the members’ regular 1040 tax return. Only an informational tax return is filed for the LLC itself.
The Limited Liability Company is Inexpensive
The LLC is inexpensive to form and to maintain (a great benefit in small business planning.) In addition, there is no double taxation as there is with the corporate structure. As mentioned above, the LLC is a pass through entity. The profits and losses pass through the LLC entity onto the members’ individual 1040s.
The Limited Liability Company has Asset Protection
The LLC provides asset protection, as essential factor in small business planning. When you sign as an LLC member, you are not risking any of your personal assets. As in a corporation, your personal assets are protected.
If you need assistance with small business planning, consult with a qualified estate planning attorney. The estate planning attorney will guide you in choosing and implementing an entity for your new or existing business.