Businesses structured as an LLC protect its owners from legal action and financial liability. Unlike a sole proprietor, who would be personally responsible for any business dealings if anything goes wrong, an LLC is a distinct legal entity that exists separately from its members.
Why set up an LLC?
One of the most common reasons for forming an LLC is to protect personal finances. An LLC exists separately from its owners, so only the assets owned by the business can be claimed by creditors. Tax benefits are another reason to set up an LLC. The profits and losses of the business are passed through to its members, who can write them off on their personal income taxes. Members of an LLC might also be eligible for a 20% pass-through deduction on their tax bill.
What do you need to start an LLC?
The paperwork varies from state to state, but you will always need to do two things: file articles of organization with the appropriate state agency, and create an operating agreement. You will also need a name and contact for receiving tax documents and court papers.
Setting up an LLC
