Have you ever wondered what those letters and abbreviations you see behind business names stand for? They are business formations meaning they help define the nature, taxation, and overall financial structure of a company. If you are planning to open your own business, you will need to define it as an L.L.C., L.L.P, or Inc. Today’s post will help to define the differences between the three main types of business formations.
L.L.C. – Limited Liability Company
An LLC is a company that blends parts of a partnership and corporation structure. LLCs combine the liability nature of a corporation and the taxation structure of a partnership company. LLCs have less corporate regulations like a Board of Directors or necessary shareholders meetings. LLCs also have fewer ownership restrictions and have more choice in deciding a tax structure. LLC and LLPs are considered “pass through” tax entities, meaning that taxation is levied through the income tax of the owners as their profits are considered the income of the individuals. LLCs, like corporations, allow the benefit of separating the proprietor’s personal and business assets. This means that any personal assets not invested in the LLC will not be at risk of loss in case of bankruptcy.