Limited liability companies (LLCs) are a popular form of legal business structure for small businesses. They're also often used by large corporations as well.
An LLC is a business entity that combines the advantages of a corporation, such as limited liability for shareholders, with the tax benefits of a partnership or sole proprietorship.
LLCs offer their owners limited liability protection, which means that they're not held personally responsible for any debts or claims against the company.
This is similar to what most corporation owners enjoy but unlike what most sole proprietors and partners enjoy in their relationships with their own business ventures.
This means that if your business fails, creditors can't go after your personal assets like your home and bank accounts. An LLC also offers flexibility in management and taxation compared to other types of businesses such as corporations or partnerships.
The most common form of LLC is called a single-member LLC. In this type of organization, only one person — the owner — has an ownership interest in the company. However, there can also be multi-member LLCs where multiple people own parts (called membership interests).
One final note regarding self-employment taxes. Just like S Corps, Each member of a multi-member LLCs must pay self-employment taxes on their share of the LLC's profits. Even if LLC members leave some of their distributive share in the business, they must pay self-employment tax on their entire share of the profits.