LLC Advantages Disadvantages

LLC Advantages and Disadvantages

LLC Advantages Disadvantages - The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.

The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

LLC Advantages Disadvantages

LLC Advantages

Owners have limited personal liability for business debts even if they participate in management
Profit and loss can be allocated differently than ownership interests
IRS rules now allow Limited Liability Corporation (LLC) to choose between being taxed as partnership or corporation

LLC Disadvantages

More expensive to create than partnership or sole proprietorship
State laws for creating Limited Liability Corporation (LLC) may not reflect latest federal tax changes

Professional Limited Liability Company
LLC Advantages

Same advantages as a regular limited liability company
Gives state-licensed professionals a way to enjoy those advantages

LLC Disadvantages

Same as for a regular limited liability company
Members must all belong to the same profession

Limited Liability Partnership
LLC Advantages

Mostly of interest to partners in old-line professions such as law, medicine, and accounting
Owners (partners) aren't personally liable for the malpractice of other partners
Owners report their share of profit or loss on their personal tax returns

LLC Disadvantages

Unlike a limited liability company or a professional limited liability company, owners (partners) remain personally liable for many types of obligations owed to business creditors, lenders, and landlords
Not available in all states
Often limited to a short list of professions.

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