What is an LLC or Limited Liability Corporation?

An Limited Liability Corporation is also known as a "LLC". An LLC is a hybrid between a corporation and partnership. Typically, a corporation has the benefit of limited liability protection. Thus, business owners can start a corporation and keep their personal assets seperate from their business assets. Limited liability protection is a huge benefit to business owners and one that the LLC gives you as business owners. In contrast, a partnership has not limited liability protection but gives you a great deal of flexibility in running the business. For example, a partner can own 10 percent of a partnership and get 20 percent of the profits as long as there is a legitimate business purpose. This flexibility allows business owners to be creative and match the business reality with the business deal. Hence, an LLC has incorporated the flexibility that partnership have with the benefit of limited liability protection unlike partnerships. Therefore, an LLC is a combination between a corporation and partnership. For tax purposes, the LLC features the flexibility that is offered by a partnership while maintaining the limited liability status of a corporation. In contrasts, corporations offer limited liability protection, but have a very rigid corporate structure. For example, a 20 percent shareholder of a corporation must take 20 percent of the profits and losses of the corporation. Furthermore, the corporation has double taxation unless it is classified as an S corporation. In most cases, small business owners are S corporations. An S corporation is an election that is granted by the Internal Revenue Service that enables an S corporation to be treated like individual tax payers without a corporation. Therefore, an S corporation is a pass through entity, which means that you are taxed as an individual taxpayer. Thus, your profits and losses depend on your itemized deductions, your gross income, and your losses among other things. For real estate investment purposes, an LLC is the favorite choice of real estate investors. LLCs are more costly to create, but their tax benefits made it worthwhile to set up.

For further information, on LLCs, S corporations, Trusts, Wills, and Civil Litigation, please call Sean Robertson with the Robertson Law Group, P.C. at 312 498 6080 or RobertsonLawGroup.com.

Robertson Law Group, P.C.
9923 South Ridgeland Avenue, Suite 99
Chicago Ridge, Illinois 60415
w) 312 498 6080 f) 312 377 2480
e) RobertsonLawGroup.com