The main advantages of an LLC are liability protection, the ease of establishing the LLC and minimal maintenance.
– An LLC is considered a separate entity from the owners. This provides liability protection for the owners.
– It is simple to set up an LLC. There is an one page form called the Articles of Organization. This form can be mail or hand delivered to the State of Michigan office located in Okemos, MI.
– There are no required operating formalities. This is unlike a corporation that does have required operating formalities. However, it’s strongly recommended that an operating agreement be executed.
How the LLC is taxed by the IRS depends on the number of owners. An LLC with one owner is considered a Single Member LLC. An LLC with more than one owner is considered a Multi-Member LLC.
By default, Single Member LLC is treated as a disregarded entity for federal income tax. An election can be filed to treat a Single Member LLC as a S Corp or C Corp.
By default, Multi-Member LLC is treated as a Partnership for federal income tax. An election can be filed to treat a Multi-Member LLC as a S Corp or C Corp.