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Forming a limited liability company

| Mar 18, 2020 | business law

When entrepreneurs in Indiana decide to form a new business, they may want to consider their options for how to structure their company. Some people may want to stick with a sole proprietorship or form a partnership, while others may be interested in developing a full corporate structure. The limited liability company (LLC) framework may provide appealing options for small business owners seeking greater levels of protection without all of the complexity of a full corporate structure. An LLC can have several owners, called members, and these can include individuals, corporations and even other LLCs.

An LLC can have multiple members or owners, but they can also be created as single-member LLCs, appropriate for a one-person business. People may choose to form an LLC because, as noted in the name, it limits liability for business owners so that they are not held responsible for debts incurred by the business, a protection not available for sole proprietorships. Because of these provisions and higher levels of regulation, some businesses like banks or insurance companies may not be registered as LLCs.

The tax treatment of the LLC will depend on a number of decisions made by the members. In some cases, the LLC may be taxed as a corporation or as a partnership. In the case of single-member LLCs, the IRS may require the owners to consider LLC income and expenses as part of their personal tax return. In general, an LLC with two or more members will be treated as a partnership unless it files a form with the IRS to be taxed as a corporation instead.

There are a number of different reasons for business owners to consider corporate structures, including taxation and litigation protection. A business law attorney may help entrepreneurs to draw up key documents and select the most advantageous form.