LLCs combine limited liability with pass-through tax treatment. They can offer benefits unavailable from S-corps, their nearest rival (for businesses other than professional practices). The key benefits:
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A way to allocate certain tax benefits disproportionately among owners.
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Opportunity for greater loss deductions.
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Avoiding or reducing tax when a new owner joins the business or when distributions are made to owners in business liquidation.
State law varies when it comes to allowing single-owner LLCs; some states allow it and some states don't. Where it is allowed, the owner can choose under check-the-box rules to have the LLC disregarded for tax purposes (without losing LLC limited liability), and pay tax directly on LLC income.
In states where single member LLCs aren't allowed S-corps are a good alternative, and they can also postpone tax, as compared to LLCs, where the business is to be bought out by a corporate giant.
