What are the Advantages of a Limited Liability Company?
Just as with forming a corporation, one of the main reasons people form a limited liability company (LLC) is for asset protection. There are a number of factors to weigh when selecting a business entity and a Bellingham business lawyer can help you make the right decisions.
While there are exceptions, for the most part, members of an LLC are not liable for the company’s debts or other liabilities. If you are starting a business and lawsuits are a reasonable threat, an LLC can offer liability protection. There may also be reasons to choose an LLC over a corporation. For example, unlike a corporation, IRS (Internal Revenue Service) taxation for LLC members is pass-through taxation, meaning the profits and losses pass through the members and each reports them on their individual tax returns. The company does not file taxes the way a C corporation does and no double taxation occurs as with a C corporation. C corps pay taxes and then stockholders pay taxes again on dividends. Another advantage of forming an LLC is that members have fewer qualifying restrictions for becoming members, and fewer annual requirements and formalities to comply with than corporations. The management structure for an LLC offers great flexibility, allowing owners to manage the company or hire managers to run the business.
Washington State does not offer as much liability protection to LLC members in creditor actions as many other states do, and a Bellingham business law firm can explain how state creditor laws work in Washington. By evaluating your options, you can make more informed decisions.