LLC stands for: Limited Liability Corporation.

A LLC is considered a type of small business by the government and eligible for the benefits of any business such as tax benefits, loans, etc. Though the name suggests that it is a type of corporation, in fact, it isn’t considered a corporation by any state or government facility. The structure of a LLC is a cross between a partnership and a corporation, according to the terms of the state.

The important aspect of a LLC is that the amount of shareholders is unlimited and the looser restrictions regarding taxing.There are many small business tax deductions that can help maximize your small business tax return. Your small business expenses are tax deductible as long as they are “ordinary and necessary.” This includes expenses that are typical to your line of business, and directly effect and improve your business model, strategy and function.

As a sole proprietor or freelancer, consider changing your freelance or small business legally to a LLC to get more benefits, but it will all depend on ythe situation, circumstances and goals.

Benefits of a Limited Liability Corporation

The owner of a limited liability corporation is protected under the state law from any type of liability caused by the company. EX: Credit, debt, lawsuits. Instead, any specific member is held responsible for their actions according to law, and frees the business (freelancer) from liabilities caused outside of their control.

The court law concept: Piercing The Corporate Veil takes precedence if special circumstances arise.

A LLC is not taxed as a whole, instead the taxes flow through to all the members and get filed according to their personal tax return. To make sense of this particular aspect of a LLC, here is an example of how the money gets distributed, taxed and expensed through this type of business.

1. The owners of the LLC receive their yearly salary amount.
2. Itemized business, property and capital expenses are deducted from the member's individual salaries
3. Each LLC member files their tax return based upon their yearly salary minus the business expenses
4. A tax return is issued to the individual LLC owners

• Inexpensive to start a LLC
• Loose restrictions and requirements, easy to establish

LLC as a Freelance Business Structure

Establishing a LLC can be highly beneficial to freelancers, small business owners or those aspiring to work from home. As freelancer, you can establish your specific “niche” as a LLC and even if there hasn't been a large profit yet, as hopefully you are working towards, utilize this type of business structure to jump start your small business.

An LLC can consist of you, or a few individuals. If each individual LLC owner is paid a yearly salary amount, this specified income is deducted from the total profit of the company. Expenses on rent, company cars, business trips, stocking products, etc. are also deducted from the profit. In addition, the property ownership of the company must be distributed among members. One member takes responsibility for the office rental, company office supplies, etc.

At the end of the year, depending upon the company’s size, income and expenditures your expenses and profit could likely come out close to equal. But, each LLC owner is receiving the salary distributed through the Limited liability Corporation.

Before Starting a LLC

A LLC is not for everyone, consider many factors when establishing your LLC and fully read all legalities according to your specific state. Generally, a LLC is best suited to, but not limited to:

Business with four or less owners

All LLC owners should fully trust and have established relationships, because the tax formation considers individual members responsible. Otherwise consider starting a corporation or sole proprietorship.

How to Start a LLC

File the “Articles of Organization” with the secretary of state. There are fees associated with establishing a LLC. Find information on the state fees and requirements here:

LLC Fees and Requirements

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