Is it worth opening an LLC?

Probably the most obvious advantage to forming an LLC is protecting your personal assets by limiting the liability to the resources of the business itself. In most cases, the LLC will protect your personal assets from claims against the business, including lawsuits. There is also the tax benefit to an LLC.

Why might someone choose to organize as an LLC instead of a sole proprietorship?

An LLC combines elements of a sole proprietorship, partnership, and corporation, and offers a lot of flexibility for owners. The owners of an LLC can decide their management structure, operational processes, and tax treatment. One person can form a single-member LLC, or multiple people can form a multi-member LLC.

When to form a LLC or a s-Corp?

Typically, when individuals are deciding to form a company, they are choosing between a C corporation (e.g., Inc., P.C. etc.) and an LLC. C-corps have to file a corporate tax return and the way owners derive income is either through a distribution or W-2 salary.

Can a LLC be treated as a corporation?

For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity.

Why do small business owners want to form a LLC?

Owners of small businesses don’t always like this — because the C-corp gets taxed at a corporate level and then at an individual level. The reason small business owners choose to form an LLC is that the income flows through to a personal return, thereby avoiding double taxation.

What is the Form 8832 for a LLC?

An LLC that does not want to accept its default federal tax classification, or that wishes to change its classification, uses Form 8832, Entity Classification Election (PDF), to elect how it will be classified for federal tax purposes.