Every year, more and more people are forming LLCs instead of other business entities. There are tax benefits compared to corporations, protection benefits compared to sole proprietorships, and they are generally less messy than partnerships. They allow for greater flexibility than many other ownership types and can be inexpensive to form. But to understand if an LLC is right for you, you need to first understand how these benefits work.
LLCs allow for pass-through income. This means that whatever profits your business shows will pass directly to the members as ordinary income. This means you avoid the double taxation associated with C-Corporations. You also will usually pay a lower overall tax rate than a corporation, which can add value even against an S-Corporation.
In addition, you are not required to file a complete separate return for an LLC as you are for many other business types. Instead, you …