Limited Liability Company-Things That You Should Know About It

When anyone makes up his mind to start a business of his/her own then the most important and difficult decision that he/she has to make is to determine the type of business organization. There are three choices that he can go for. The choices are sole proprietorship, partnership or a corporation. Taking this decision is difficult if the tax consequences are considered. The most convenient and the safest choice that is popular now days is the limited liability company.

A limited liability is also called as LCC (or L.C.C) and is indeed a unique form of business organization which offers the owner the provision of limited liability. It is a type of business ownership which is neither a corporation nor a partnership. It is a company where the shareholders limit there liability exposure to the amount of their individual percentage of the ownership, investment of the equity interest in the company. Thus, the personal assets of the shareholders' are protected to a large extent. For this type of company the tax situation is similar to that of partnership business where the tax return is filed with IRS for the purpose of information only. In this type of company the partners share with each other the profit and losses of the business in which they have invested. In a LCC owners are called members and not partners or shareholders.

* The number of members in a LCC is unlimited. The number of members may just be an individual too. * The members may include individuals, corporations and/or other LCCs also. Some LCCs do not restrict foreign entities as well. There is no limit to the maximum number of members of the limited liability company. * The most important aspect of it is that it limits the person's financial liability to a fixed sum only. The concept of a limited liability company is very similar to that of a corporation. But it offers flexibility to smaller companies. * A limited company may have only one member but may be treated as a disregarded entity. * Some of the businesses that includes banks, insurances companies and non-profitable organization are not included in LCCs.

Mainly the liabilities are divided into two categories:

Current Liabilities-The current liabilities include payables such as taxes, wages, and account payables. This is mainly a long term bond.

Long-term liabilities- The long term liabilities are expected not to be liquidated within a year.

Advantages of limited liability companies: The LCC provides its owner with the liability protection of a corporation. Although all the LCCs act like a separate entity they look much like an interlinked corporation. They provide a wide range of flexible profit distribution which is unlike a common partnership where the profit is split 50-50.

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