LLC Company Information: Everything You Need to Know
LLC company information is the data for a limited liability company. A limited liability company (LLC) is a business that has registered in a state as one.4 min read
2. Federal Taxation Options for Limited Liability Companies
3. Requirements for LLCs
4. Legal Liability
5. LLCs and the IRS
6. Asset Ownership
7. Capital Considerations
LLC company information is the data for a limited liability company.
What is an LLC?
A limited liability company (LLC) is a business that has registered in a state as one. LLC owners or members enjoy advantageous tax treatment and protections from personal liability. Each state has specific structures and statuses in place, which will play into the decision of the state you register in. The business structure of the limited liability company allows for a lot of flexibility.
Owners of an LLC are called members. The managing member is the leader of the organization and responsible for operations and management. Members claim the profits and losses of the limited liability company on their personal income taxes. Net profits are not considered to be personal income of the members. Therefore, it is not subject to self-employment tax.
Federal Taxation Options for Limited Liability Companies
Businesses are able to opt to be taxed in a number of ways. The Internal Revenue Service allows LLCs to be taxed as a sole proprietorship, partnership or corporation. While multi-member businesses may be taxed as a corporation or partnership if a single-member, limited liability companies are automatically taxed as a sole proprietorship for tax purposes.
Requirements for LLCs
Limited liability companies are regulated by the state. The Secretary of State’s office requires limited liability companies to keep records on finances, managing members, and business operations.
These records should be kept at a central location like the headquarters or the principal location.
These records should include the following:
- Articles of organization
- Changes to names and addresses of members
- Federal tax information
- State tax information
- Local tax information
- Financial statements
- Company operating agreements
Just what liability is limited by the LLC? When an individual forms an LLC, a separate person is created from the one or ones who are its members. So, when an LLC is formed and that entity is sued, there are protections for the owners and managers from liability and debt. Doing business with the public is a ticket to liability.
That is why so many opt for the protection of this type of business structure. Thousands of business owners lose everything they own every year due to their personal liability with unincorporated businesses. Of course, there are requirements for the business to follow to ensure that the business that is an LLC looks and acts like a completely separate legal entity. This protection from liability is one of the reasons that forming an LLC is so attractive to members or owners. In fact, LLCs have become extremely popular for this reason, especially for owning assets such as real estate.
LLCs and the IRS
The Internal Revenue Service allows more tax deductions to business structures that are not limited liability companies. LLC owners actually report the loss and profits of the business on their personal tax returns. In this way, the tax liability passes through and double taxation is avoided. In addition, medical expenses, business trips, entertainment and pension plans can be written off as business expenses.
LLCs enjoy a lower audit rate than self-employed individuals. It is allowed for you to be both a member and employed by the LLC. This eliminates the self-employment tax. It also appears that the Internal Revenue Service treats LLCs with preference in regard to tax deductions.
Asset searches can be conducted to discover an individual’s real estate, vehicles, or investments. If the asset is in an individual’s name, it can then be used to satisfy debts or liabilities. These assets may make a lawsuit against you look lucrative. However, placing that same asset in the name of a limited liability company provides a cloak of invisibility between you and someone looking for your assets. This privacy might make you less attractive for litigation to an attorney doing an asset search. This privacy can be enhanced by a company’s incorporated nominee privacy service.
Limited liability companies have more capital available to them than partnerships or sole proprietorships. With an LLC’s position being separate from the owners (members), people are more likely to invest money without also accepting responsibility for the company’s debts or litigation.
Many of the richest Americans are people who hold their assets through membership in LLCs started by them or their family. Sole-proprietorships and partnerships are often sold for up to two times their annual earnings. Companies, on the other hand, are often valued at 12-25 times annual earnings or sometimes even more.
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