What is an LLC?
A limited liability company (LLC) is the United States-specific form of a private limited company. The LLC itself does not pay federal income taxes, but some states impose an annual tax on LLCs.
The costs of forming an LLC will vary from State to State. In general, you can expect to pay a minimum of between $50 and $500 to form your LLC, and around $100 annually to maintain your LLC.
Forming an LLC offers the owner a major legal advantage of protecting your personal assets from the creditors of your business.
There are several advantages of forming an LLC such as:
- There is no need to file a corporate tax return, owners would report their share of profit and loss on their individual tax returns.
- Owners do not have to be US Citizens or permanent residents.
- Owners have limited liability for business debts and obligations.
- Partners, Vendors and Suppliers may look more favorably on your business when you have formed an LLC.
There are also different types of LLC’s that can be formed such as
A Domestic LLC is is conducting business in the state it was formed.
A Foreign LLC is generally when an existing Domestic LLC decides to conduct business in new state it will need to be registered in that state as a foreign LLC.
A Professional LLC is one that performs a professional service eg. medical or legal practice. In order to form a Professional LLC, it is necessary for certain members of the LLC to possess the necessary state licenses to demonstrate their professional qualifications. The limitation on personal liability does not extend to professional malpractice claims. Before forming a Professional LLC it is advised to seek legal counsel.