A Limited Liability Company or LLC is the type of program that many companies use. Even those that work from home sometimes incorporate themselves as an LLC because of the protection an LLC offers. A company listed as an LLC has the same benefits of a corporation, but without any of the problems that larger corporations face, which makes it perfect for smaller businesses. A larger corporation must deal with share distribution and annual reports, which tell stockholders and the general public how the corporation fared that year. Small businesses listed as an LLC is not required to do the same things.
When your business is registered as an LLC, you have some protection when it comes to claims on the business and debts associated with that business. The name makes your company work like a partnership, which gives you some tax incentives, even if you do not have partner. Anyone can own an LLC business, including aliens or individuals that live in other countries, owners that reside in a different state, partners, or sole proprietors. Many businesses use the LLC name when creating a business plan because it changes the overall markup of the company.
With a larger business, individuals typically own stocks in that company. The individuals can sell their stocks at any time, which changes ownership. LLC businesses are different because the business does not have stocks. Instead, ownership reverts to the individual or group of individuals that created the company. The owners are not required under law to have any type of stockholder or shareholder meeting and the law does not require any yearly meetings. Larger businesses typically have meetings and record those minutes, which are then released to the public. Creating an LLC is one way that companies learn how to save money on annual expenses.
LLC businesses have tax benefits. Corporations and larger companies must use the tax rate associated with businesses and corporations. Any earnings or losses stay associated with the corporation. With an LLC, the losses and earnings stay with the owners of the company. As an owner, you can take a loss on your company and record that loss on your income taxes, which might result in a bigger tax refund. To protect itself, the government only lets owners take a loss for a specific number of years. During that time, you are not required to pay taxes on your business. Only after that time passes do you start paying taxes back on your LLC.