Limited Liability Companies and Their Benefits for Your New Business
When you are considering opening a business, you understand that there are five primary types of business structure. These business structures include sole proprietorship, partnerships, corporations, or c-corps, S-corporations, and limited liability companies. One of the most popular types of business structure is the limited liability company, which is a type of business that shares characteristics with both partnerships and corporations. Some benefits come with organizing your business in the form of an LLC.
It is critical to start with the definition of a limited liability company. An LLC is a business structure wherein the owners are not personally liable for the company’s debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
The Main Benefits
One of an LLC’s primary benefits is that the owners have limited liability for the business’ decisions. If there are debts owed or the company is sued, the owners do not have to pay for those debts out of their pocket. Members of LLCs, much like corporations, are protected from business debts.
Another benefit to using limited liability companies is that the income earned by an LLC flows to the members. Taxes on the income are paid through the owners’ income taxes. An LLC is not taxed as a business entity separate from the owners, much like a corporation. This gives those with a limited liability company more business flexibility to distribute income to owners as they please. LLCs also benefit from flexibility with their membership structure. If LLCs have a single member, that member has full control over the company while bestowing the benefits of an LLC.
Limited liability companies also provide the same benefits of a corporation without the same level of record keeping. This level of operational ease is one of the best advantages of an LLC. Plus there is much less registration paperwork involved when you choose to open a limited liability company. LLCs also offer lower start-up costs than S-corporations, so LLCs are a common alternative to this structure.
There are other benefits of choosing an LLC for your business’ structure. There is no double structure with LLCs because any profits earned are taxable only at the corporate level. Owners of an LLC only pay taxes on profits on their personal income tax returns. As well, LLCs offer the advantages of deducting health insurance premiums on an income tax return. A managing member of the LLC can deduct 100 percent of their health insurance premiums.
If you are considering a limited liability company and are unfamiliar with the process, it’s best to work with a professional. With New Mexico LLC formation, you can work with a professional that can handle everything from registration to fees and taxes and the final paperwork. When you work with a professional, you can also be sure that an LLC is the best structure for you. Understanding that LLCs can be incredibly beneficial for your new business, Cindy’s New Mexico LLC formation can help you form the ideal business structure for you.