Information about the LLC structure
When you create a company in Pennsylvania, you have the option of classifying the business as a limited liability company, or LLC. This is generally true whether you are the only owner of the business or have one or more partners. Owners in an LLC are referred to as members, and there are few rules when it comes to who can be a member of such an entity.
Individuals and entities can be members
You, your parents or your friends could theoretically be owners of an LLC. If another LLC buys a stake in your business, it could also be considered a member. Both foreign and domestic corporations are allowed to be listed as members of your LLC. In most states, there are no limits as to the number of members a company can have.
How LLCs may be treated for tax purposes
The IRS will treat an LLC like a disregarded entity, a partnership or a corporate entity for income and business tax purposes. If you have sole ownership of your business, you will be seen as a disregarded entity. This means that you will report any profits or losses that your business generates on your personal tax return. If your company has two or more owners, it will be considered a partnership. You can choose to have your organization taxed as a corporate entity by filing Form 8832.
Certain entities are not allowed to use the LLC structure
If you are starting a law firm or financial services company, it may not be possible to use the LLC structure. Furthermore, if your company is affiliated with a foreign LLC, there may be special rules that you need to follow.
If you are thinking about starting a company, it may be beneficial to speak with a business law professional. He or she may be able to help you learn more about how to form an LLC as well as the potential benefits of doing so. In addition to limited liability, this structure may reduce your self-employment tax bill.
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