THE ADVANTAGE AND DISADVANTAGE OF LIMITED LIABILITY COMPANY
An LLC (limited liability Company) is a type of business that provides flexible enterprise. This business can be owned by a person or a group of an individual. As the name implies, the owners (also called the member) have limited liability on the actions of the LLC. The benefits of LLC encourage businessman on creating an LLC. A lot of help can be found on the Internet on how to form an LLC. Business owners seek professional help on how to incorporate legal documents in establishing an LLC.
The advantage of LLC
1. The owner or members of the LLC can protect their assets in their LLC is in debt. The debtor cannot force the LLC members to pay their debts with their personal assets.
2. LLC member can have the pass-through taxation. This means that the personal income tax return of the LLC owner or LLC member will also reflect as the tax of the LLC.
3. Establishing a business as LLC reflects the commitment of the owner to the business. It also heightened the credibility of the business.
4. It is a flexible enterprise where the owners or members can establish their own organizational structure as agreed upon by the members.
5. An LLC has limited compliance requirements, unlike the S and C corporations.
The disadvantage of LLC
1. There are restrictions on the number of LLC owners.
2. The formation and on-going expenses of LLC is costly in some states. Renewal of fees is also high in some states.
3. There are lesser law restrictions governing the LLC. In case of the problem may arise, there’s no law that may interfere to protect the members.
4. It is not easy to transfer ownership in an LLC. The members of the LLC must approve the new member which makes the share difficult to sell.
The advantage of LLC
1. The owner or members of the LLC can protect their assets in their LLC is in debt. The debtor cannot force the LLC members to pay their debts with their personal assets.
2. LLC member can have the pass-through taxation. This means that the personal income tax return of the LLC owner or LLC member will also reflect as the tax of the LLC.
3. Establishing a business as LLC reflects the commitment of the owner to the business. It also heightened the credibility of the business.
4. It is a flexible enterprise where the owners or members can establish their own organizational structure as agreed upon by the members.
5. An LLC has limited compliance requirements, unlike the S and C corporations.
The disadvantage of LLC
1. There are restrictions on the number of LLC owners.
2. The formation and on-going expenses of LLC is costly in some states. Renewal of fees is also high in some states.
3. There are lesser law restrictions governing the LLC. In case of the problem may arise, there’s no law that may interfere to protect the members.
4. It is not easy to transfer ownership in an LLC. The members of the LLC must approve the new member which makes the share difficult to sell.
