Limited Liability Company

A Limited Liability Company (LLC) is a legal entity designed to provide a hybrid of liability protection and tax benefits for its owners. Unlike sole proprietorships or partnerships, a LLC shields its owners, known as members, from personal liability for the company’s debts and obligations. 

In comparison to corporations, LLCs differ primarily in ownership structure and tax treatment. While both offer limited liability protection, LLCs are owned by one or more members, whereas corporations are owned by shareholders.

LLCs offer flexibility in management structure and ownership, catering to the specific needs of the business. Members can choose to manage the LLC themselves or appoint a designated manager. This adaptability makes LLCs an attractive option for small and medium-sized businesses seeking limited liability protection combined with operational flexibility.

One significant advantage of forming a LLC is its pass-through taxation status. This means that the LLC’s profits and losses are not taxed at the business level; instead, they “pass through” to the individual members, who report them on their personal tax returns. Additionally, LLCs have the option to choose how they want to be taxed, either as a partnership, a C-corporation or a S-corporation.

Establishing a LLC involves relatively simple formation and maintenance processes compared to other business structures like corporations. LLCs are not required to hold regular shareholder meetings or maintain detailed records, reducing administrative burdens.

Forming a LLC can enhance the credibility and legitimacy of a business, which is beneficial when interacting with customers, suppliers, and other stakeholders. Customers are often reassured by the formalized structure of a LLC, viewing it as a sign of professionalism and stability.

LLCs are particularly well-suited for business owners seeking to protect personal assets from business liabilities or those engaged in high-risk activities prone to lawsuits or significant debt accumulation.

As experienced estate planning lawyers, we at Reagan Moore frequently incorporates LLCs as a component of asset protection planning. Our first step is to ask our client to describe their objectives.  Understanding their goals will shape our strategy for them. We’re here to discuss your options.