Three Reasons to Love Your LLC

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I admit it. I love the LLC as the best business structure for most people. One warning though, the flexibility of the LLC means a lot of choices. And those choices can get you in trouble if you make uninformed decisions. This week we’re going to be focusing on the Series LLC as a great structure for businesses and investors. It all starts with the LLC.

Love Your LLC #1: Better Asset Protection!

An LLC (Limited Liability Company) is a tax chameleon. It can elect how it wants to be taxed. That means as far as the IRS is concerned and most states are concerned, an LLC-S (an LLC that has elected to be taxed as an S Corp) is exactly the same as an S Corporation. But there is one more huge advantage.

If you have an S Corporation, a personal judgment can get to your stock in the corporation, and thus to the business. But, if it’s an LLC-S, the ownership is protected in most states with charging order protection.

The LLC-S has the same tax treatment of the S Corporation with the added benefit of additional asset protection.
In today’s world, asset protection has never been more important. Everything you’ve worked for could be gone in a second with a judgment pursued by a hungry lawyer.

Love Your LLC #2: Flexibility!

The LLC can elect how it wants to be taxed and, this is the best part, you don’t need to decide right away. Under some great new rules from the IRS, we’re able to select the tax treatment we want right up until the last day of the year.
I had clients discover this loophole completely by surprise when they became clients of USTaxAid Services. In one case, an LLC had been set up with a doctor as the sole member. (By the way, we didn’t do this) He’d operated a few years this way and every year wondered why he had to pay so much more tax than his colleagues. During the first tax strategy appointment with me we discussed his current situation and I pointed out that he paid over $15,000 EXTRA tax due to the way his LLC was being taxed.

Since it was already December, my client was certain that this year was a lost cause and resigned himself to paying an extra $15,000 again. That’s when he discovered that because he had an LLC we could elect to be taxed as an S Corporation (which is what he should have been) and it would be retroactive for the whole year.
No other structure gives you the flexibility of an LLC.

After reading this article so far you might get the idea that I think business structures are important. Just in case you wondered, let me be clear.

The selection of the RIGHT business structure is the most important decision you can make for your tax strategy plans.
I’ve saved the best for last, but I’m going to make you wait a bit. Check back tomorrow to read the third, and maybe the biggest, reason why I love LLCs.

I’ve saved the best for last, but I’m going to make you wait a bit. Check back tomorrow to read the third, and maybe the biggest, reason why I love LLCs.

Make sure you check this week’s featured item: The Series LLC: The Ultimate in Business Structure Flexibility

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