LLC Flashcards
What does LLC stand for?
Limited Liability Company
True or False: An LLC provides limited liability protection to its owners.
True
Fill in the blank: An LLC combines the benefits of _______ and _______.
corporations, partnerships
Which of the following is a pro of forming an LLC? A) Double taxation B) Limited liability C) Unlimited personal liability
B) Limited liability
What is one major disadvantage of an LLC?
Self-employment taxes
True or False: LLCs are subject to the same formalities as corporations.
False
What is the primary advantage of limited liability for LLC owners?
Personal assets are protected from business debts and liabilities.
Fill in the blank: LLCs are often favored by _______ and _______ businesses.
small, medium
Which tax structure can an LLC choose?
Single-member or multi-member taxation, or elect to be taxed as a corporation.
True or False: An LLC can have an unlimited number of members.
True
What is one requirement for forming an LLC?
Filing Articles of Organization with the state.
Which of the following is NOT a pro of an LLC? A) Flexibility in management B) Limited liability C) Higher taxes
C) Higher taxes
What does ‘pass-through taxation’ mean in the context of an LLC?
The business income is reported on the owners’ personal tax returns, avoiding double taxation.
Fill in the blank: Members of an LLC are referred to as _______.
owners
True or False: LLCs can raise capital by selling stock.
False
What is a potential disadvantage regarding the transfer of ownership in an LLC?
Ownership transfer may be restricted and require approval from other members.
Which state is known for having favorable LLC laws?
Delaware
What is one administrative requirement for maintaining an LLC?
Filing annual reports in some states.
True or False: LLCs are easier to manage than corporations.
True
What is the role of an Operating Agreement in an LLC?
It outlines the management structure and operating procedures of the LLC.
Fill in the blank: An LLC protects members from _______ liability.
personal
What is one reason why LLCs may face higher self-employment taxes?
Members may be considered self-employed and subject to self-employment tax on profits.
Which type of LLC is formed for a single owner?
Single-member LLC
True or False: LLCs are not recognized in all states.
False
What is the main disadvantage of the flexibility of an LLC?
It may lead to misunderstandings among members without a clear Operating Agreement.
