When picking out the right entity type for your new enterprise, you may be thinking about forming an LLC. This kind of company can offer a lot of flexibility and protection for its members, which is why it’s such an attractive option for many new businesses. Today we’re going to talk about how to apply for an LLC, and what protections it can offer.
What is an LLC?
A limited liability company is a relatively new form of business. Unlike partnerships or corporations, this kind of entity is not recognized by the federal government – meaning that they are only issued by the state.
The way that an LLC functions is that it’s created around the founders of the company. For example, if you go into business with three other people, each member is part of the LLC. This also means that if any of you decide to leave the company, the entity dissolves and you have to form a new one.
LLC Protections
One of the primary reasons to form an LLC is that it offers limited liability (hence the name). Unlike a partnership, each member is not personally liable for the business expenses and debts accrued, nor are they responsible for debt incurred by other members.
What’s even better is that this liability also protects the company in case of personal debts. Creditors and lenders are not able to come after the business to collect.
For example, if one of the founders owes $20,000, the creditor can’t take it from the business. If the company owes that money, creditors can’t come after the founders to collect.
Pass-Through Income
But, if you’re worried about liability, why not form a corporation? Well, the reason is that your business and personal income are taxed once, not twice. When you incorporate, you are taxed on your earnings (salary), as well as any money you make from profits. With an LLC, company profits are considered pass-through income, which means fewer taxes are taken out.
Bottom Line
Forming an LLC is a viable option for many small businesses. If you want to find out more or apply online, visit www.govdocfiling.com to fill out the application and get your entity started.
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