What is a Set Up Limited Liability Company?

          A Set Up Limited Liability Company (LLC) combines the advantages of corporations and partnerships, the corporation's protection from personal liability for business debts and the pass-through tax structure of partnerships and sole proprietorships. While setting up an LLC is more difficult than creating a partnership or sole proprietorship, running an LLC is significantly easier than running a corporation.

          Business starters can form an LLC with just one person in almost every state except Massachusetts, which requires to have two owners (legally called members) to form an LLC. Even though there is no maximum number of owners that an LLC can have, for practical reasons you would be well advised to keep the group small. In general, LLCs do not count more than five members.

          The same way as shareholders of a corporation, all LLC owners are protected from personal liability for business debts and claims. It means that if the business itself cannot pay a creditor such as a supplier, a lender or a landlord, the creditor cannot legally come after any LLC member's house, car or other personal properties. The reason lies in the fact only LLC assets are used to pay off business debts. In fact LLC owners only risk losing the money that they have invested in the LLC. However there are some restrictions to limited liability. You can approach an attorney to know in detail those restrictions. Despite those restrictions you can have a liability insurance policy which can protect your personal assets when limited liability protection does not or ignored by a court. Insurance can also protect your corporate assets from lawsuits and claims.

          Contrary to a corporation, an LLC is not considered separate from its owners for tax purposes. Instead, it is what the IRS calls a "pass-through entity”. This aspect means that business income passes through the business to the LLC members, who report their share of profits or losses on their individual income tax returns. Each LLC member must make quarterly estimated tax payments to the IRS.

          At last, in terms of management, all the owners of most small LLCs participate equally in the management of their business. This arrangement is called "member management". For larger LLCs, members can opt for a” manager management structure”.