Benefits Of A Limited Liability Company

759 Words4 Pages
A Limited Liability Company (LLC) is often regarded as a hybrid business structure: it mergers the protection of a corporation with the tax benefits and relative administrative simplicity of a partnership. For these reasons, it is considered an ideal business form for most small to mid-sized businesses with multiple owners. When starting a business, partners may choose to create an LLC rather than a standard partnership, thereby obtaining the substantial benefits provided by an LLC. In this structure, the partnership agreement terms are essentially couched in the LLC Operating Agreement and govern the operation of the entity. An LLC may be directly managed by all its members (member-managed LLC) or selected members appointed by the members (manager-managed LLC). An LLC managed by its members operates substantially like a partnership. The major benefits of using an LLC for a partnership include: Limited liability. An LLC shields its members from incurring liability for the business debts and obligations of the other members. The limited liability protection afforded by an LLC is a significant advantage over a general a partnership structure, which does not shield its partners from the liabilities of fellow partners in the event of a partner’s default or exit from the partnership Tax treatment. The IRS default rule stipulates that an LLC report taxes in the same manner as a partnership. Alternatively, the IRS allows LLCs to report income as a corporation, but this election
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