What is a key advantage of a Limited Liability Company (LLC)?
Practice Questions
1 question
Q1
What is a key advantage of a Limited Liability Company (LLC)?
Unlimited personal liability for owners
Pass-through taxation
Complex management structure
Limited lifespan
An LLC offers pass-through taxation, meaning profits are taxed at the owner's personal tax rate, avoiding double taxation.
Questions & Step-by-step Solutions
1 item
Q
Q: What is a key advantage of a Limited Liability Company (LLC)?
Solution: An LLC offers pass-through taxation, meaning profits are taxed at the owner's personal tax rate, avoiding double taxation.
Steps: 4
Step 1: Understand what an LLC is. An LLC stands for Limited Liability Company, which is a type of business structure.
Step 2: Learn about taxation. Normally, businesses pay taxes on their profits, and then owners pay taxes again on their income from the business. This is called double taxation.
Step 3: Know what pass-through taxation means. In an LLC, the profits go directly to the owners without being taxed at the business level first.
Step 4: Realize the benefit. Because of pass-through taxation, owners only pay taxes on the profits at their personal tax rate, avoiding double taxation.
