The most apparent benefit of creating an LLC is that it protects your personal assets by restricting your responsibility to the resources of the firm itself.
In most situations, the LLC will shield your personal assets from claims made against the company, including litigation. This allows small business owners, such as sole proprietorships and partnerships, to get limited liability protection comparable to that provided by corporations, but without the cost and complexity that corporations entail. For example, if you form an LLC, you will not be required to submit a separate tax return for your company.
Your revenue and expenses will continue to be recorded on Schedule C for sole proprietorships and Schedule E for partnerships on your individual income tax return. There is also a tax advantage to forming an LLC. This is especially true for “C companies,” which the IRS recognises as separate entities.
Taxes on net income must first be paid to a company before the income is given to the owner, who is taxed again at the individual level. This is known as double taxation, which an LLC may completely avoid. (You may also avoid it by forming a Subchapter S corporation, but this requires a more complicated setup as well as continuing compliance and filing obligations.) Another advantage is a soft one: including “LLC” or “Limited Liability Company” in your business name might make your company appear more professional. It signifies that the company has been registered with the state and is more significant as a legal entity.