What Is An LLC? Asset Protection and Tax Savings Via Business Entity Formation.
by Peter McFarland, J.D., LL.M
In my years of experience as a licensed attorney in the field of asset protection, clients and potential clients who are just starting out often ask me, “What is an LLC?”
LLC is an acronym for limited liability company. LLC’s are great because they combine the best of two different worlds: tax planning and asset protection.
Congress drafted much of our current tax code in 1986. LLCs appeared on the scene about 6 years later, in 1992. When LLCs showed up, Congress didn’t just throw out the Tax Code. Instead, they told taxpayers to CHOOSE how the LLC would be taxed when setting it up. This means that, with proper business entity structuring, an LLC can take advantage of the tax benefits traditionally associated only with a C-Corporation, S-Corporation, or a Partnership.
The LLC also benefits from strong asset protection. In fact, an LLC will give you asset protection similar to a corporation, because it is a separate and distinct legal entity from you, the owner. For example, if someone decides to sue your business, they're suing the LLC - not you, personally - so your personal assets are protected. Getting all of this right requires proper advice and a careful eye to observing certain formalities.
Here’s a thought experiment for you: drive down the street and look at the signs for businesses. Just notice how many LLCs there are and how many corporations there are. You’ll quickly see that the LLC is largely the entity of choice for most businesses.
The important thing is to get it right! Contact us to set up an initial consultation. We can discuss your plans and see if setting up a business entity is the right choice for you. Thanks so much for joining me.