A Limited Liability Company (LLC) is a private and separate legal entity that combines the characteristics of the other three business structures. It’s a business structure that protects the owners of the company from being personally liable for the company’s debts or liabilities. An LLC is a separate legal entity to you as a person. An LLC can have multiple owners (also known as shareholders). This differs from the sole proprietorship structure which recognizes you and your business as one entity. An LLC is still considered a ‘pass through entity’ by the IRS, meaning that, just like the previously mentioned two structures, the business passes on its income to the owners or investors, who then report their share of the profits or losses on their individual tax returns. You should consider becoming an LLC if you’re earning substantial profits, your business is facing higher risk, you have valuable personal assets that you want to protect, and you still want to pay less tax than a corporation.
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