LLCs Explained: Understanding Limited Liability Companies

Limited Liability Companies, or LLCs, are a popular business structure that combines the best traits of a corporation, general partnership, and sole proprietorship. LLCs offer limited liability protection to their owners and pass-through taxation, making them an attractive option for many small business owners. Let’s explore the details of LLCs and the advantages and disadvantages of this business structure.

Defined As An LLC is a legal entity separate from its owners, offering limited liability protection to its members. This means that the personal assets of the LLC’s owners are protected from business debts and liabilities. LLCs are not taxed as separate entities, but rather, the company’s profits and losses are passed through to the owners and reported on their individual tax returns.

Taxation LLCs are treated as a partnership or disregarded entity for tax purposes, but they can elect to be taxed as a corporation instead. LLCs that opt for corporate taxation are required to file a separate tax return, which may result in double taxation of profits.