What Is a Limited Liability Company? A Brief Explanation
A limited liability company (or LLC) is a type of company that protects its owners from the debts, lawsuits, and other obligations that the company acquires. You should try starting a limited company, In other words, the owners have “limited liability” just as shareholders would have in a corporation. However, unlike a corporation, the owners are only taxed for the same income once. This means that when the company makes money, you only pay taxes when you receive your share of the profits.
What else makes an LLC different? For starters, it usually requires less paperwork. You don’t have to make several reports to various government departments. Even regular meetings with a board of directors aren’t required. It’s because of this that many startups and new businesses file their company as an LLC rather than any other kind of business entity. Also, because of the minimal paperwork, fees, and requirements, LLCs are relatively easy to set up. There are even services for expedited filing if you need your LLC filed and running in 24 hours.
Still, a limited liability company is not as perfect as it sounds. Sure, you have limited liability when you start, but you must make sure that you always follow both the state and your LLC’s guidelines so that your limited liability protection isn’t lost. If there are any activities you have that may be viewed as misconduct, it’s best to consult a lawyer who is familiar with the business laws in your state so that your limited liability protection stays intact.
Keep in mind also that not all types of businesses may be filed as LLCs – it depends on your state’s laws. In some states, business owners should file law and architecture firms as partnerships instead. Check your state laws if you suspect that your type of business won’t be allowed to file as an LLC.