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Why are so many new businesses choosing a limited liability company (LLC) form of ownership?
There are several reasons why so many new businesses choose LLCs:
1. Liability Protection: An LLC is a separate legal entity from its owners, meaning that the members of an LLC are not personally liable for its business debts and liabilities. This provides them with protection against potential lawsuits or other financial losses resulting from business activities.
2. Pass-Through Taxation: Another benefit of forming an LLC is pass-through taxation. The profits and losses of the company “pass through” to the members of the LLC without double taxation, meaning that you only pay taxes once on your income at the individual level.
3. Flexibility: An LLC offers more flexibility than other forms of ownership as it allows for different types of management structures (member-managed/manager-managed) and profit distributions among members (unlimited options).
4. Perpetual Existence: An LLC has perpetual existence, which means it can outlive its founding members; this makes succession planning simpler compared to other forms of ownership like partnerships where all members must agree to continue in order for it to exist after one leaves or passes away.