Limited Liability Companies and Corporations and Limited Liability Insurance Company LLC Business

Limited Liability Insurance Company LLC Business

Limited Liability Companies and Corporations

Whether you are planning your business to service a very select clientele or you’re going to open your doors to the public and take on all comers, you’re going to need to create the business as a separate legal entity so that you can’t be held personally responsible for the business’ debts and other liabilities. This can be done in a variety of ways, but one of the more popular of these is through the creation of a limited liability insurance company but not a corporation.

The LLC has become increasingly popular in recent years, to the point that many major companies that you deal with on a regular basis may be limited liability companies. Is it in your business’ best interest to be incorporated as a limited liability company? Here is some information for you to consider so as to help you decide.

Partnership-Like Features of Limited Liability Company

Much like a standard partnership, money that is made through a limited liability company can be channeled directly to its members (with “members” being the legal term for an LLC’s owners.) This is important, because it deals with a major drawback of incorporation, something that is known as “double taxation.” With a standard corporations, any money that the corporation makes is taxed at a special corporate rate.

When the owner of a corporation wants to be paid, they have to take their income as a dividend of the money that the business corporation has made and then they have to pay standard income taxes on that money. This means that taxes have been taken out of their income twice by the time that they receive it; this is why it’s advantageous to have profits flow through directly to LLC members. Income tax still has to be paid on money that is earned through limited liability companies, but the separate corporate tax rate doesn’t apply to any money that you’ve made (as it isn’t held by the company itself.)

Limited Liability Companies Corporation-Like Features

The great thing about limited liability companies is that they feature some of the better aspects of corporations in addition to those of partnerships. One of the big features that LLC share in common with corporations is that they are able to assume liability for their own debts meaning that if the company goes bankrupt or gets sued, then you aren’t going to have to worry about the judgment affecting your personal finances. The limited liability insurance company will absorb the debt, and while it may have to be liquidated in order to satisfy what is owed none of that debt will carry over to you provided that the corporate veil is still intact.

If you aren’t sure what that last piece about the “corporate veil” means, it’s simply a way of saying that your finances are safe so long as the court doesn’t order that you are personally liable because there wasn’t a distinct line between your personal finances and the limited liability insurance company’s finances. So long as you run your business properly like a business should be run (meaning that you pay yourself with the payroll instead of taking money directly from the business, don’t use the business to cover personal expenses, and essentially don’t treat the business’ books like they were your own private credit account), then the chances of the corporate veil being pierced are exceptionally slim.

Limited Liability Insurance Company LLC Business

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