A limited liability company is basically a legal business entity in which the owner’s liability is limited. This type of business organization is best suited for small scale business as they have a limited number of partners. A limited liability company in fact is neither a partnership nor a corporation. But it is formed by combining the features of both these. In it, the businessman’s liability is restricted to his investment in the company. This means that he is not liable for the debts incurred due to the transaction made by the company. A limited liability status provides protection to the owners from some liabilities of being in the business and at the same time give them some tax related benefits. California LLC formation
The various advantages for a limited liability company are:
* Limited liability status helps in protection of the assets- The limited liability company model of business organization is an effective and efficient method to carry out business. The asset protection technique to cover your personal and other precious assets is done by permitting the LLC to have a blanket mortgage on all your assets. Also you should not put all eggs in one basket and must have multiple LLC for multiple types of risks of legal entities. This eventually spreads out your risk.
* Beneficial in real estate investments- Its flexibility permits limitless number of members.
* Helps in estate tax planning and eradication of the probate- It is the best way to shift the wealth amongst members of the family. The earlier generation can retain management of the assets by eradicating the interests of the third party and limiting membership while removing gift and estate tax results.
* Benefits related to creditor transactions- A limited liability status is helpful when taking money from old money-lending institutions like banks, etc.
* Charitable gifting- Charitable giving is better facilitated through an LLC.
* Profit distributions are flexible- The distributions of the profits can vary with any percentage profit sharing under the LLC umbrella.
* Multistate operations and professional protection with LLC- It is known that the operations in multiple states and professional practices are enriched by the employment of LLC model of organization.
So these are some of the advantages of limited liability company model of organization. It has been observed that the model is fast catching the eye of individuals. The possible reason for this can be its undeniable supremacy over the single proprietorship and incorporation model of business organization. Because of these positive attributes it is really beneficial for the smaller companies or businesses to adopt the Limited Liability Company model of business organization.