Review the various options and select two business structures to compare and contrast. Review the different options and choose two business structures to compare and contrast.
Limited liability company (LLC)
An LLC lets you take advantage of the benefits of both the corporation and partnership business structures.
LLCs protect you from personal liability in most instances, your personal assets – like your vehicle, house, and savings accounts – won't be at risk in case your LLC faces bankruptcy or lawsuits.
Profits and losses can get passed through to your personal income without facing corporate taxes. However, members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security.
LLCs can have a limited life in many states. When a member joins or leaves an LLC, some states may require the LLC to be dissolved and re-formed with new membership – unless there's already an agreement in place within the LLC for buying, selling, and transferring ownership.
LLCs can be a good choice for medium- or higher-risk businesses, owners with significant personal assets they want to be protected, and owners who want to pay a lower tax rate than they would with a corporation.