Like a sole proprietorship or partnership, an LLC enjoys pass-through taxation. This means that owners (also known as “members”) report their share of profits or losses in the company on their individual tax returns. The Internal Revenue Service (IRS) does not assess taxes on the company itself. This avoids the “double taxation” that general (c corporations) experience. In a c corporation, the IRS taxes profits at the corporate level and dividends at the shareholder level. When creating an LLC, owners need not distribute profits and losses in the LLC in proportion to ownership (pursuant to IRS guidelines). The owners of an LLC can agree to allocate the company’s profits and losses among themselves however they see fit, not necessarily based on the percentage of the company each owner controls.