A limited liability company is a company that exists as a separate entity from its owners. This means that in the event of bankruptcy or financial difficulty, the personal assets of the owners or shareholders are safeguarded. In other words, they only stand to lose the capital which they invested in the business. Their private funds cannot be used to settle any outstanding debts, which the company might accumulate in future. A limited liability company is best suited for smaller companies with a few number of owners. Furthermore, unlike a corporation, a limited liability company is easy to set-up and straight-forward to manage on a daily basis. It is also worth mentioning that if you opt to form a limited liability company, you can choose any mode of profit distribution you deem appropriate. This is quite different from partnerships where profits must be shared on an equal basis.
Limited liability companies can also file their taxes in a flexible manner. This is because they can either file as a corporation or as a partnership. This all depends on how the owners file their first taxes. Another advantage of a limited liability company is the fact that the company can have an unlimited amount of owners or shareholders. It is these advantages of limited liability companies that you might find appealing when choosing this form of business structure. However, you should be aware that you should form a corporate business structure and not a limited liability company, if you wish to take your company public in future.
