A Limited liability company (LLC) is a business structure that provides limited liability protection and pass-through taxation. As with a lot of corporations, the LLC legally exists as a separate entity from its owners. With that being said, owners cannot usually be held personally responsible for the business debts and liabilities.

The LLC permits for pass-through taxation, as its profit is not taxed at the entity level. However, a tax return for the LLC has to be completed if the LLC has more than one owner. Any LLC income or loss as shown on this return is passed over to the owner(s). The owners, who are also called members, must then report the income or loss on their personal tax returns and pay any extra (needed) tax.

The law permits you to incorporate your own LLC (by yourself) but there are a lot of moving parts which you might find troublesome. As such, you might to consider using LLC services to help incorporate your company. In case you are interested, I found this list of top LLC services guide by Business Fair Field.

Here are some advantages of using an LLC service to incorporate your company.

1. Limited Personal Liability

If your business is a sole proprietorship or a partnership, that means you and your business are legally the same “person”. Your business debts also means that they are your personal debts. And if your business partner or employee is indicted of carelessness, then your personal assets might be at risk.

LLCs are accountable for their own debts and obligations, and although you can lose the money you have invested in the company before, personal assets such as your home and bank account cannot be used to collect on business debts. Your personal assets and accounts are also protected if an employee, business partner or the business itself is sued for carelessness.

2. Less Paperwork

Corporations also provide limited liability, but they have to witness certain requirements that may not be well suited for a small, informally run business. For example, corporations usually must hold annual shareholder meetings, make yearly reports and pay yearly fees to the state. They also tend to have substantial recordkeeping necessities.

In contrary, LLCs don’t have to hold annual meetings and usually are not needed to keep extensive records. In a lot of states, LLCs do not need to file annual reports.

3. Tax Advantages of an LLC

LLCs get the best of all experiences when it comes to taxation. LLCs don’t have their own federal tax organisation. However, they can take on the tax status of sole proprietorships, partnerships, S corporations or C corporations.

The Internal Revenue Service routinely classifies LLCs as either partnerships or sole proprietorships, depending on whether they have one owner or more. This basically translates into the fact that LLCs can always take advantage of “pass-through” taxation in which the LLC does not pay any LLC taxes or corporate taxes. In its place, the LLC’s income and expenses pass through to the owners’ personal tax returns, and the owners pay personal income tax on any profits made. 

In distinction, traditional C corporations are taxed 2x on distributions to shareholders: once at the corporate level and once at the personal level. S corporations usually avoid double taxation and receive pass-through tax treatment, however, not all corporations are eligible. If you're filing the tax for your small business for the first time, check out small business taxes made easy

4. Ownership Flexibility

S corporations relish pass-through taxation, but they have several ownership restrictions though. For instance, they cannot have more than 100 shareholders, cannot have foreign shareholders and cannot include shareholders that are corporations. LLCs provide pass-through taxation without many restrictions on the number and type of owners they can have.

Conclusion

An LLC’s simple and flexible business structure is perfect for many small businesses. While both corporations and LLCs provide their owners limited personal liability, owners of an LLC can also take benefit of LLC tax benefits, management flexibility and trifling recordkeeping and reporting requirements.