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An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation (as long as they would otherwise qualify for such tax treatment), providing for a great deal of flexibility.
LLC stands for "limited liability company," which is a business structure that combines the pass-through taxation of a sole protectorship with the limited liability of a corporation.
For tax purposes, LLCs are largely pass-through entities like sole proprietorships. You won’t face corporate taxation. Forming a corporation is typically more expensive and takes more work.
However, if one is the sole member of a domestic limited liability company (LLC), one is not a sole proprietor if one elects to treat the LLC as a corporation. [5] In the United States, sole proprietors "must report all business income or losses on [their] personal income tax return; the business itself is not taxed separately.
The two most popular ways of organizing a small business are LLCs and sole proprietorships. They are less costly and complicated compared to the alternatives of corporations and partnerships.
Unlike many other business entities, the sole proprietorship lacks a clear distinction between personal and business income. [23] The business owner is personally liable for income tax and National Insurance contributions due on the business profits in each tax year. They are also personally liable for any debts the business incurs.
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