The term LLC stands for Limited Liability Company. Forming an LLC is the simplest way of structuring your business to protect your personal assets in case your business is sued. LLCs can be owned by one or more people, who are known as LLC “members.” An LLC with one owner is known as a single-member LLC and an LLC with more than one owner is known as a multi-member LLC. Forming your business as a limited liability company helps to protect you against lawsuits, significantly cuts down on paperwork compared to corporations and other legal entity types, and helps to present your business as more credible.
Advantages of an LLC
Personal Asset Protection
Provided there is no fraud or criminal behavior, the owners of an LLC are not personally responsible for the LLC's debts or lawsuits. In a normal partnership, any member who wants to limit his or her liability can no longer be involved in the day to day management of the business. One of the advantages of a Limited Liability Company is that all members are protected from personal liability without any restriction on their ability to manage and participate in the LLC.
Pass Through Taxation
An LLC’s profits go directly to its owners, who then report their share of the profits on their individual tax returns. Hence, an LLC’s profits are only taxed once. This is known as pass-through taxation. In a C-Corporation, profits are subject to "double taxation": profits are taxed before being distributed to owners and taxed again when owners report their share of profits on their individual tax returns.
Limited liability companies are relatively easy to form and maintain with little paperwork. Unlike C-Corporations and S-Corporations, LLCs are not required to assign formal officer roles, hold annual meetings, or record company minutes and resolutions etc.
Forming your business as a limited liability company brings added credibility. An LLC is recognized as a more formal business structure than a sole proprietorship or partnership. Including LLC in your business name lets customers and partners know that you are a serious business.
Access Business Loans
Once you have formed an LLC, your business can begin building a credit history. This will help your business access loans and lines of credit.
Why Should You Choose a Delaware LLC?
Delaware has a population of just under one million residents, however, over a million businesses—more than 50 percent of publicly traded companies in the U.S., more than 60 percent of Fortune 500 companies, and more than 80 percent of recent U.S. based Initial Public Offerings (IPOs) —are incorporated in Delaware. Companies such as Facebook, Google, and Disney, incorporate in Delaware. Below you will find a few benefits of incorporating in Delaware:
There has no personal income tax for non-residents.
Shareholders, directors and officers of a corporation or members or managers of an LLC don’t need to be Delaware residents.
Delaware LLC owners can act as their LLC's CEO, Treasure, Secretary, President, etc. There are no requirements to name separate people to those posts.
There is no minimum capital requirement to start a Delaware LLC.
Stock shares owned by persons outside Delaware are not subject to Delaware taxes.
Delaware allows non-residents to form (start) an LLC from out of state (all 50 states and world wide) without ever visiting the state, you just need a Delaware-based registered agent.
Delaware has no sales tax.
No SSN required for LLC formation.
Delaware allows LLC owners to remain anonymous.
Form4Free provides free basic LLC formation to it's customers.