LLC – what is it?

2.10.2022
1524
llc

In Ukraine, as well as in the CIS countries, many businessmen open for business a limited liability company (partnership). A similar organizational and legal form takes place in many foreign countries and offshore companies.

An LLC is a legal entity that combines the features of a partnership, a private entrepreneur, and a corporation. The peculiarity of this form is that it has end-to-end taxation and limited liability. As a rule, an LLC can have one or more participants.

An LLC is a form of business organization that eliminates double taxation. In most countries, corporate profits are taxed twice before they reach the final recipient. First, the company pays income tax, then the tax on the received dividends is paid by an individual. In simpler words, an llc is a limited liability company.

Such companies are a hybrid organizational and legal form of business, which has some features of a joint-stock company LTD and a limited liability company.

The liability of the company’s owners is limited to a percentage of the authorized capital. Each owner of the company has a certificate of participation, which indicates the size of the share in the company.

One of the main advantages of this form of business organization is tax transparency. What does it mean? The company does not pay corporate income tax. All received income is immediately received by the company’s participants. Each owner includes them in the total annual income and pays income tax on it.

If the owners of the company are residents of a jurisdiction where there is no income tax, then they will not have to pay it accordingly. Another prerequisite for the tax-free regime is the absence of income in the country of registration. How to understand? In the United States, in order to avoid paying taxes, an LLC simply does not have to have an office in the country.

LLC LLC and its advantages

llc is

The company is an independent legal entity, the owner of which is not personally liable for debts and other obligations of the company. This means that in the event of bankruptcy or a legal dispute with the company, the owner’s personal assets – property, finances, cars – will not be considered as assets of the company.

Company Features:

  • there is no list of directors and shareholders.The owners of the company are called participants or founders, the amount of their contribution and rights are fixed in the foundation agreement and charter;
  • the participant’s profit depends on the share of capital;
  • a member of the company independently declares the profit received from the company;
  • in some US States, it is popular to register a single-member society to create a partnership structure;
  • the lender does not have the right to demand payment of the debt at the expense of the participant’s personal funds.

Despite the fact that the definition of a company is very simple, many businessmen do not fully understand the meaning of this organizational and legal form. What mistakes are most common in the business environment?

Some businessmen sometimes say: “I want to open a limited liability corporation-LLC”. In reality, there is just an LLC company, which is not like standard corporations.

If an individual entrepreneur says that he wants to register as an LLC, then this expression will be incorrect, since the company is a legal entity and has its own characteristics that an individual entrepreneur does not have.

The main advantage of this legal form is limited liability and guaranteed protection of personal assets of the company’s participants. In addition, the company’s advantages include::

  • easy tax return submission.If a company has only one founder, then taxation is practically the same as that of an individual entrepreneur.In addition, the participant can choose the tax regime himself.
  • minimal red tape and paperwork;
  • only you can use the company name.

In companies of this type, there are much fewer corporate formalities, such as the annual meeting of the company’s members, meetings of the board of directors, etc.

LLC LLC – where to open it?

llc what is it

When you enter the abbreviation of a limited liability company in the search bar, you get a list of English-language sources. This is due to the fact that this legal form is mainly used in countries where the British legal system operates.

In other words, similar organizations can be opened in the United States, in particular, in Texas, Alabama, Nevada, Utah and Delaware. Offshore jurisdictions include Nevis, the Isle of Man, Saint Vincent and the Grenadines, and the Marshall Islands.

As practice shows, the probability of being in the wrong place at the wrong time is very high. In the state chosen to open an llc, not only the management, but also tax and international legislation can change at any time. Before opening such an organization, you need to carefully study information from official sources or contact the company’s experts who deal with the issues of opening an LLC.

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