Limited Liability Company (LLC)
By default, an LLC also has pass-through taxation, similar to sole proprietorship or partnership. However, LLCs have the option to elect to be taxed as an S Corporation or C Corporation, potentially offering tax advantages.
Starting a Limited Liability Company (LLC) with Startup Tandem
The process of forming a Limited Liability Company (LLC) involves several key steps that establish a distinct legal entity for a business. To begin, potential members must select a suitable business name that adheres to state regulations and is distinguishable from existing entities. Articles of Organization, outlining essential details like the company’s purpose, management structure, and registered agent, are then filed with the state’s business authority. Once approved, an Operating Agreement is crafted, delineating the LLC’s internal operating procedures, member rights, and responsibilities. By default, an LLC benefits from pass-through taxation, where profits and losses are reported on members’ individual tax returns, akin to sole proprietorships or partnerships. A notable advantage of LLCs lies in their flexibility; owners can choose to be taxed as an S Corporation or C Corporation, potentially unlocking valuable tax benefits based on their specific financial circumstances. This pivotal decision contributes to the LLC’s versatility and appeal, making it a preferred choice for many entrepreneurs seeking legal protection and favorable taxation.