What are some of the advantages of forming my business as a limited liability company?

A limited liability company is a relatively new form of business entity that did not become popular until after a 1988 ruling by the Internal Revenue Service that classified an LLC as a partnership for tax purposes. That is one of the principal advantages of forming your business as an LLC—pass-through tax treatment, so that LLC profits are passed through to members, who then pay tax on their share of the profits, such that your business’s income is taxed only once, rather than twice as in corporations (once when the corporation pays federal and state taxes on its income, and again when shareholders pay taxes on dividends paid to them by the corporation). Another advantage of forming your business as a limited liability company is that LLC statutes specifically provide for limitations on the personal liability of LLC members and managers for the company’s debts and obligations. Another unusual aspect of LLCs is the degree to which the rules governing the inner workings of the entity can be set by the parties themselves, in an operating agreement, which can alter all but a few of the default rules set by statute for LLC governance and thereby permit you to run your business more informally as an LLC than as a corporation.