Why You Should Have An LLC

1. Why You Should Have An LLC LLC means a Limited Liability Company. The LLC is one of the most popular business structures and for good reason.An LLC is often the perfect structure for sole proprietors because you get asset protection without the complexities of a corporation. A Limited liability company is a legal entity that is separate and distinct from its owners.As the name suggests, it limits liability --meaning members or owners are not liable for the debts of the company and creditors cannot seek the personal assets of the members. This shield is not available to sole proprietors or traditional partnerships. Your liability is limited to your personal contribution to the LLC—but not your personal assets. Benefits In addition to the limits on liability, some of the other benefits of a LLC are: The flexibility of structure— It is much easier to form and operate as opposed to corporation. In addition, there are not as many recordkeeping requirements. LLCs are not required to have annual meeting or a board of directors—although, it is good to have a board of advisors and to have regular meetings, it is not required, but it is required of a corporation. An LLC is a pass-through tax entity—meaning that the owners report the profits and loss on his/her personal income tax return, paying your personal tax rate on any business income. With an LLC-the owner pays self employment tax. LLCs do not need to file a separate business return.With an LLC—you don’t get a paycheck—you take a “draw” , you don’t have federal and state taxes withheld. The income passes through to you as an owner and you file the income on your individual tax return. However, when you file your return, you pay self employment taxes, which include social security and Medicare when you file your tax return, unless you elect to be taxed as an S-Corp. One disadvantage of an LLC is that members or owners of the LLC can have higher taxes because of self- employment taxes. An LLC is not a tax benefit— it is an asset protection strategy. LLC’s do not save in taxes. They protect your assets. If you start to make a decent wage about $3,000-$4,000 a month, a tax strategy would be to form an S Corp or choose to have your LLC taxed as an S-Corp. When you have an LLC you pay double self-employment taxes. Because your employer pays half of the employment taxes and the employee pays half, when you are the owner, you pay both, because you are both the employer and the employee. With an LLC you cannot be taxed an employee, you are taxed as an owner.If you have a S-corp or LLC taxed as an S-corp, you can elect to be an employee and only pay half of the taxes. However, with an LLC, you can be registered as and LLC and choose to be taxed as an S-Corp. You can have the best of both worlds. It is easy to create an LLC with Law Depot. Click here to create your LLC using Law Depot. I am an affiliate with Law Depot. If you use Law Depot to create your LLC, I will get a commission.

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