Explain the importance of limited liability when setting up a business organization?

1-Less Paperwork and Recordkeeping : Does not have to have a board of directors or officers

2-Flexible Tax Treatment : Can elect to be taxed as a sole proprietorship, partnership, C corporation, or S corporation.

3-Limited Liability : Can only lose the amount of capital they invested in the firm. They cannot lose their personal assets

4-Pass-through Taxation : There is no double taxation of earnings unless the company decides to be taxed as a C corporation

Advantages of Limited Liability Company

Limited Liability: Owners of a LLC have the liability protection of a corporation. A LLC exists as a separate entity much like a corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee.

Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is50-50, LLC have much more flexibility.

No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions.

Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax.