The business formation know as a limited liability company, or LLC, can be best considered to be a hybrid between a partnership and a corporation. To put it simply, limited liability company give a business the good parts of a corporation without all of the corporate protocols.

The multiple owners, called members, of an LLC get looked upon as a partnership for tax purposes. It is a pass-thru tax structure, so income taxes are paid by its member, so, unlike a corporation, the LLC itself never pays income tax.

Because of this, an LLC does not suffer from the double-taxation problem that a corporation does. In other words, because the tax burden is put on only the owners, income tax is paid just one time. However, a limited liability company must still pay state (if applicable) and federal payroll taxes.

At the time of LLC form, a decision is made about how to handle income taxes. You have the choice to be taxed like a sole proprietor, a C corporation, or an S corporation. The choice is yours.

Assuming that the LLC is set up correctly, and personal and business happenings are kept completely separate, the owners can look forward to certain personal liability protection. This is one of the biggest reasons to form an LLC versus running a business as a sole proprietor. Also, a company earns more reverence when it has a formal structure, such as a limited liability company.

Forming a LLC is done by a person who does not necessarily have to be a member. You can actually use an online company to form your LLC for a very reasonable cost, which means you are assured that everything is set up correctly.

Typically, a member’s financial liability is limited to the financial contribution made by that member. And an LLC’s structure allows you to bring in multiple partners, who can either be actively involved in the business, or serve as silent investors.

An LLC is a business structure that is very very much like a corporation, but allows more flexibility to its owners. Creating an LLC with an incorporating online company is most suitable for a smaller business in which the number of owners is limited.

In the US, the limited liability company is a fairly new business structure. As early as 1986, limited liability companies were only permitted in two states. Today, every state recognizes this business structure.

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