What Is Limited Liability (LLC)?

Updated: Sep 14

As the owner of Neva Alliance, a company that provides training and consultancy to business owners, I am often asked what an LLC is? A limited liability corporation (LLC) protects your assets. It secures that your liability for the business' debts and responsibilities is no more than the amount of money you invested in the company. An LLC protects your home, automobiles, and other personal assets from paying off any debts accrued by your company. Without limited liability protection, your home could be used as collateral to repay its debt after a lawsuit or bankruptcy.

With an LLC, the business's profits are "passed through" to the owners. Gains and losses are reported on the owners' tax returns, and not at the business level. As a result, filing taxes is often easier for owners of an LLC. Any losses or operating costs of the business can be deducted on personal tax returns, helping offset other income.

Owners of an LLC may also be required to pay self-employment taxes. Some states require LLCs to pay a franchise tax.

Incorporating as an LLC provides business owners flexibility. A Limited Liability Company (LLC) has the freedom to distribute its ownership stake to its members without regard to its financial contribution to the LLC.

An LLC can be owned by foreign individuals, other corporations, or any trust. This may make it the right choice for businesses in certain circumstances where these factors are essential.

LLC Pros:

Liability protection

Easier process for setup

Flexibility on taxes

LLC Cons:

Self-employment taxes

Difficulty attracting investors for funding

Added formation costs and franchise tax for some states

For more information visit www.nevalliance.com.


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