Wondering what does LLC stand for? Protect Your Assets - Get the answers here!
An LLC or limited liability company is a newer (as opposed to corporations) among business organizational structures within the US. The LLC could be simply put as – Limited Liability Company, because its structure is supposed to limit the amount of liability or legal exposure that an individual partner may have in operating or being a part of a business.
Business people consider opening an LLC because its members in the LLC remain fully protected against all the financial or legal obligations vested on the company. Personal assets won’t get seized even if the venture goes totally bankrupt. (Fraud may be an exception) In addition, it’s also obvious that the no one tells the members anything even in the instances when the company is financially liable in the lawsuit. But that is not the case when it comes to the businesses that are formed under the sole proprietorship stature or partnerships. The LLC may be less money, compared to the costs involved with the formation and operating of a corporation.
The members of an LLC aren’t excluded from liability when they engage in any kind of illegal actions or operations. They could be held fully liable if they used their company in committing fraudulent activities or if they have guaranteed to pay back any debt personally. They could also be held liable when they neglectfully appoint or supervise the manager or employee or any other member who causes harms or damages to any third party. In some businesses ( insurance or banking companies) the protections afforded to the members, may be different. An LP, Limited Partnership or some other entity might be required. Consulting a qualified business consultant, attorney and or an accountant may be in order to best address your particular situation. Specific tax rules, benefits and requirements as well as governing laws may vary as business laws may change. Be sure you are updated to avoid any penalties, break any laws and also to maximize your benefits arising from changes.
While trying to figure out ‘what does LLC stand for,’ some people end up with the wrong assumptions. Actually, the three letters “LLC” stand for words – Limited Liability Company. The wrong assumption is – Limited Liability Corporation. But it’s not a corporation like inc., it’s a company. Fortunately, you can find different types of resources online regarding the aspects of LLC. Find the websites that are educational as well as informational and from trusted sources.
The earning and losses attained by the company gets passed through the owners – just like the partnership ventures and S corporations. Then again, these earnings and losses are reported on individual tax returns in line with the Schedule C. An LLC may have the right to get directly taxed as if it were an entity. (Some exceptions may apply in certain states, ie. if there is only 1 member then it may be taxed differently.) Be sure to consult a professional to get current advice. Certain parameters must be followed to be a legitimate LLC, recognized by the states you do business. If an LLC operates outside the state it was filed in, it may be considered a “foreign” LLC and be required to file in the state that’s in addition to the originating state.
The laws that apply to LLCs are not too complex. They are formed under the laws of the state and follow that state’s statutes or laws. Statures, requirements and fees vary from one state to another. The LLC can have virtually any number of members, as opposed to the scenario when it comes to the S corporations that are limited to only 100 Shareholders. An LLC could be a single member venture too. The IRS regards single member LLCs as sole proprietorship businesses and taxed accordingly. Be sure to weigh in your best scenario when forming your LLC or any other business structure.