You may know that LLC stands for limited liability company. And you probably could name several businesses whose names end with LLC. Her are some things you may not know:
- An LLC generally protects its owners from personal liability for business obligations in much the same way a corporation does but an LLC is not a corporate entity.
- The owners of an LLC are called “members.” There is no limit on the number of members an LLC can have, and members don’t necessarily have to be individuals. Members’ management roles are typically spelled out in an operating agreement.
- An LLC may borrow money in its own name and is responsible for repayment of the debt.
- An LLC is usually treated as a partnership for federal income tax purposes, although it can also be treated as a sole proprietorship or s-corporation. (The remaining two points assume partnership treatment.)
- LLC members are taxed directly on company income. The LLC itself doesn’t pay federal income taxes.
- If an LLC has a loss, its members generally can deduct their share of the loss on thier own tax returns.
Before structuring your business as an LLC, consider the advantages and disadvantages from both a tax and a nontax perspective.