LLCs and Corporations information

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Creating a limited liability company (LLC) is an ideal option for those ready to separate their business and personal assets formally but do not plan to enter the international market or attract external investment. The creation of an LLC can significantly reduce the tax burden. You need to weigh all the pros and cons of creating an LLC just for your business.

What is LLC?

It is a legal entity that has its taxpayer identification number and bank account. Also, LLC has the right to conduct business on its behalf. It can be called a kind of “hybrid” of corporation and partnership. Like a corporation, an LLC limits the legal obligations of its owners. Like a partnership, an LLC is also an intermediate subject for taxation. It means that individual members are taxed only once on any LLC profits (unless otherwise specified in the operating agreement).

Three main advantages of LLC:

  • Lack of double taxation. The profits of an LLC are not taxed at the company level, so gains paid to members are not taxed twice.
  • Less paperwork. There are far fewer regulatory requirements for an LLC with an excellent legal reputation in the US. It means that fewer documents will need to be submitted to the relevant government agencies.
  • Flexibility in management. With the help of your lawyer, you can create your own special rules for the LLC, which will be most beneficial for managing your business. It makes the LLC easily adaptable to the changing situation in the country and the economy.

Two main disadvantages of LLC:

  • Less attractive to investors. The LLC does not have its own shares, so it isn’t easy to become a new member. If you plan to attract many investors, setting up an LLC is not the best solution.
  • Personal taxes will rise. Although you will not be subject to double taxation, you will pay higher self-employment taxes as a member of a limited liability company.

To understand if setting up an LLC is right for your business, you will need to answer questions about your current situation and your business plans for the future.

The cost of setting up an LLC depends on the number of participants, plans for investments, and the nuances that must be provided for in the shareholder agreement. To better understand the cost for your specific situation, please consult.