What is an LLC? Limited Liability Company

What is an LLC? Limited Liability Company

by Maha

LLC stands for Limited Liability Company and it’s a type of business entity. LLC is a separate legal entity and has combined features of both a corporation and a partnership business. Especially small business owners who want to start a business then LLC is a better option for them because LLC limits your liabilities only against the assets of the company and protects from personal liabilities for business debts and claims.

How Do You Start an LLC?

Registering the LLC is relatively simple. You can file the article of organization or some other simple documents easily from the secretary of state’s office in the USA.

But if you don’t handle the legal documentation then GYB Firm can register your LLC in any state of the USA and your dreams of starting a business in the USA will come true. GYB Firm handles your all legal documentation and also takes care of Employer Identification Number (EIN), Registered Agent Address, Sales and Use Tax, Annual Filing, and other processes.

Benefits of a Limited Liability Company (LLC)

There are many benefits of a Limited Liability Company but here we discuss a few major points. 

  • Hybrid Features of LLC
  • Limited Liability Protection
  • Ownership Flexibility 
  • Reduce Paperwork
  • Profit Distribution Flexibility

Now, there is a brief explanation of all the above key points of LLC.

Hybrid Features of LLC

LLCs have hybrid features which means they cover the combined elements of a Sole Proprietor, a Corporation, and a Partnership. LLC is the simplest business entity to register and operate. It’s not necessary to have directors and officers, shareholder meetings or boards, or other responsibilities that come with having a corporation. 

Limited Liability Protection

LLC business structure protects the members or owners from personal liabilities for business debts and claims. This means if the owner unfortunately faces a loss in their business then he is only liable to pay from his business assists and when the business assists are sold and still the business loss is not covered at that moment the owner is not liable to pay from his assists like his personal car, house, apartment or anything which is on his name not business. 

Ownership Flexibility

LLCs can have an unlimited number of members, and these members can be individuals, corporations, other LLCs, or foreign entities. Ownership of an LLC may change very easily from member to member or any other designation like an LLC can be under another LLC, corporation, individual, or member. Due to this sort of flexibility, the owner can easily enhance the assistance of the business. 

Reduce Paperwork

LLCs require less paperwork than corporations or any other structure of the business. There is a very easy way to register an LLC in the USA and also requires less amount of paperwork in the filing of the annual report of an LLC as compared to a corporation or a partnership. That’s why the LLCs provide more protection and privacy for the owner or member. 

Profit Distribution Flexibility

LLCs are not required to divide the profits in proportion among their owners. Members of the LLC can decide how to allocate the profits and losses of the business according to their capital investment and designation of the business. And also offers flexible management in financial arrangements. 

Disadvantages of a Limited Liability Company (LLC)

There are a few disadvantages of a Limited Liability Company. Also, keep an eye on these points as well.

  • Costly
  • Self-Employment Taxes
  • Complexity in Raising Capital
  • Filing Annual Returns
  • Legal Documentations

Costly

Registration for an LLC is a costly process and the cost varies from state to state.  Every state of the USA has a different filing fee. Once the LLC is registered, you will have to pay the annual filing fee annually to renew your LLC. The owner of the LLC also bears some other costs like registered agent fees, business licensing and permit fees, operating agreements, and some basic fees. 

Self-Employment Taxes

LLC members may have to self-employment taxes, which can be higher than the taxes paid by S corporation shareholders on distributed profits. This includes Social Security and Medicare, both calculated on a member’s distributed share of the LLC profits.

As an LLC owner, the downside to tax is that you’ll pay twice the self-employment tax as an employee because the tax contributions of employers are matched by their employees.

Complexity in Raising Capital

Raising capital in LLCs may be more challenging as compared to a corporation. As mentioned in the benefits LLCs have flexible ownership structures but this flexibility is beneficial for managing the business. It can create complexity and uncertainty for investors.

Overall, while LLCs offer many advantages, these factors can make it more challenging for them to attract significant investment compared to corporations.

Filing Annual Returns

To do a long-term business in the USA the filing of annual returns is also a challenging part for LLC owners. The annual filing fee varies from state to state and you need to renew it on an annual basis if you make delays in filing annual reports then your LLC will be revoked and you will get a lot of penalties from the Secretary Of State (SOS). 

What is an LLC? Limited Liability Company

Legal Documentations

Once an LLC is registered then you need to do some legal documentation to run your business legally and it costs you. Firstly, you need to get the Employer Identification Number (EIN) it’s free but if you are a non-resident and don’t know how to get it from the Internal Revenue Service (IRS) then you need to hire any professional to get it for you.

Secondly, you need to get a sales and use tax ID from the relevant state where your LLC is registered some states have a fee to get a sales tax ID e.g. Wyoming has $60, Hawaii has a $20 fee, etc. But most states are free to get a sales tax ID, if you don’t know how to get it from the state then you need to hire an accountant. 

GYB Firm does all the legal documentation on your behalf and makes the process easy for you.

Recommendations

Registering an LLC in the USA is not rocket science at all now. GYB Firm provides LLC and C-Corp incorporation, EIN registration, US bank account opening, and federal and state tax filing services. Contact us through email at info@gybfirm.com or WhatsApp to set up your business in the USA & UK while not residing in the United States or United Kingdom.

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