Limited Liability Corporations or “LLCs” are one of the most used business models of incorporation. Many new businesses that have multiple owners will choose between the LLC or a partnership. To briefly describe legal partnerships, there are two types: general and limited. General partnerships are when two or more individuals voluntarily choose to own a for-profit business where they share equal management, as well as, profits/losses.
Limited are when one partner controls the business and other “limited” partners provide capital. A Limited Liability Corporation is when multiple partners form a for-profit business, with a operating agreement that details duties and profit, but where the business is run like a corporation. In short, the LLC is a legal entity that protects the partners from personal liability should the business fail or incur debt of any kind.
This type of business entity is highly popular for that very reason. No business idea is guaranteed, nor are interpersonal relationships. The LLC is easily dissolved, but also manages to protect individuals within the company from debts that the business may incur. No one will lose their home, savings, or property because of a business debt. This is a great reason to look over this model of incorporation. Moreover, the business cannot be impacted by the personal debt of those involved.
The LLC is a relatively cheap way to incorporate, has many of the tax advantages of a partnership because it is a state entity, and all of the legal protections of a corporation. It is an ideal business entity for those who are starting out because it provides multiple tax options, is easily dissolvable, and offers legal protections that other models do not have. Most attorneys and CPAs recommend this entity for most of the smaller partnerships that inquire about incorporation.