Business Structures 4 | The Biz Knows

Business Structures cont

Limited Liability Company

Pros of LLCs

• The primary advantage of LLCs is that they offer liability protection similar to that of a corporation

• Can be created with one person as a member (unlike partnerships which require at least two people)

• The company owner can choose how the LLC should be taxed - either like a partnership or sole proprietorship where the owner is taxed at the individual level (i.e., just file you individual taxes and claim your business expenses on you individual form) or like a corporation where the owner files a separate tax statement for the LLC. The IRS calls this option the check the box rule and pass through taxation.

Cons of LLCs

• Must file documents with the Secretary of State

• Must file Articles of Organization with the Secretary of State

• Must draft an operating agreement that servers as the agreement among the members which describes the affairs of the LLC and the conduct of the business (may have to file this with the State but generally needs to keep a copy along with the LLC's records)

• Must pay yearly fees to renew the LLC and file specific paperwork yearly

Business structure example: LLCs must display the LLC after the name of the business. This shows the public that the business owners enjoy limited liability.

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