User login

Unlimited Possibilities with Limited Liability Companies

(May 2008) posted on Sun May 11, 2008

More screen printers are looking toward LLC status as a way to operate competitively while protecting their personal assets. Read on to find out about the other advantages associated with limited liability companies.


By Mark E. Battersby

Screen printers, take note: There’s a relatively new business structure on the block. While the S corporation re-mains the most used type of small business entity, the limited liability company, or LLC, is increasingly becoming the en-tity of choice for both new and existing screen-printing businesses.

LLCs are popular structures for screen-printing operations because, as with an incorporated business, owners have limited liability for the company’s debts and actions. This article describes how your company might benefit from forming or restructuring as an LLC.

 

LLC defined

LLC is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. As is the case with owners in partnerships or sole proprietorships, LLC members report business profits or losses on their personal income-tax returns; the LLC itself is not a separate taxable entity. Other features of LLCs are more in line with a partnership, such as providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members, and since most states do not restrict ownership, members may include individuals, corporations, other LLCs, and even foreign entities. There is no maximum number of members, and most states also permit single-member LLCs, those having only one owner. Only a few types of businesses cannot be LLCs, such as banks, insurance companies, and nonprofit organizations.

Like owners of a corporation, however, all LLC owners or members are pro-tected from personal liability for business debts and claims—a feature known as limited liability. This means that if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually cannot reach the personal assets of the LLC members, such as houses or cars.

Unlike S corporations, LLCs have no limit on the number or nationality of members, can own subsidiaries and can have more than one class of interest—a good method of unequally divid-ing income and losses. A limited liability company—yes, company, not corporation—can select varying forms of distribution for profits. Unlike a common partnership, where the split is 50-50, LLCs have much more flexibility. LLC profits are taxed only once, at the owners’ tax rate, when earned by the entity.


Terms:

Did you enjoy this article? Click here to subscribe to the magazine.