What Is a Limited Liability Company (LLC)?
A limited liability company (LLC) is a type of business structure that blends features of partnerships and corporations. As multi-purpose entities, LLCs can be used to run a business or to hold assets, and may be formed for profit or nonprofit purposes in Ohio. The owners of an LLC are called members, and they are protected against personal liabilities.
An LLC is considered a disregarded entity if it only has one member or a partnership if it has more than one owner. For tax purposes, an LLC must have the same state and federal classification. There are many different types of LLCs available to Ohioans, including the following:
- Single-member LLCs are the most common form of LLC and recognized in every state. These LLCs have single owners and are treated as sole proprietorships by the IRS.
- Multiple-member LLCs have multiple owners and are structured similarly to general partnerships. Although owners are responsible for company debts and obligations, their personal assets are protected.
- Member-managed LLCs are LLCs managed by members rather than by managers.
- Manager-managed LLCs are companies whose members select managers and ascribe their responsibilities. Owners can also manage the LLC but have no obligation to do so.
- Professional LLCs (PLLCs) are LLCs reserved for industries that require special licenses to practice and are ideal for doctors, lawyers and accountants.
- L3C companies are for-profit entities designed for humanitarian efforts that allow pass-through taxation similar to nonprofits.
The right type of LLC for you will depend on a variety of factors, including the nature of your business and your specific financial situation and goals. Navigating the potential implications of your choice can be difficult, which is why it’s typically a good idea to work closely with an experienced LLC lawyer during formation.
Benefits of a Limited Liability Company (LLC)
There are many benefits associated with LLCs, the most notable of which is that the owners (or members) only have limited liability in regard to company obligations. That means that a member’s individual assets can’t be used to satisfy the LLC’s debts and financial responsibilities.
LLCs come with the added benefit of perpetual existence, meaning they won’t be dissolved in the event of ownership changes, as well as a flexible management structure. Additionally, LLCs offer pass-through taxation, meaning the company’s gains, losses, income, deductions, credits and other tax items flow through to members.
Disadvantages of an LLC
Although limited liability companies offer many advantages, they also come with a few disadvantages, including cost. LLCs are typically more expensive to establish and maintain than partnerships; many states charge an initial formation filing fee and some charge ongoing ones. Additionally, transferring ownership of an LLC is more difficult than with a corporation, and in many cases, all members must approve alterations in ownership percentages.Contact Us