Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Why LLCs are Popular
Here are some reasons for the popularity of LLCs
- Personal Liability Protection
- Pass-Through Tax Treatment
- Management Flexibility
- Ownership Not Restricted
Personal Liability Protection
Like shareholders of a corporation, LLC members are not personally liable for LLC debts or obligations arising from contractual arrangements between the LLC and others. LLC members receive the same personal liability protection as shareholders of a corporation without having to incorporate. This is an attractive feature because you save the time and expense of going through the incorporation process.
There is an exception to the limited liability protection that you should be aware of. Trust fund taxes, which include, federal employment taxes, such as federal income taxes and FICA taxes that should have been or were withheld from employees' gross pay. Regardless of the legal form of business, LLC or corporation, owners may still be held personally liable for delinquent trust fund taxes. Filing bankruptcy won't help either.
Not only may each of the owners be held liable for trust fund taxes, the IRS can even look to employees of the business who had responsibility for the payroll, such as the accountant or bookkeeper!
Pass-Through Tax Treatment
An LLC does not pay tax on income at the entity level. LLC income is taxed only once, at the individual level. That's why an LLC is referred to as a pass-through entity. This pass-through tax treatment provides LLC members with two important tax advantages:
- No double taxation
- Business losses may be deducted on an individual's income tax return.
In contrast, C corporations are not pass-through entities. Net income is taxed at the entity level. In addition, when the corporation pays its shareholders a dividend from after-tax income, the shareholder's are taxed on that income as well. This is known as double taxation.
Management Flexibility
An LLC is not subject to certain statutory constraints the way corporations are.
For example, C corporations must hold annual shareholder meetings and prepare minutes of meetings and retain certain documents as evidence that state laws have been complied with. LLCs do not have to meet such requirements.
LLC members may conduct business according to the rules specified in the LLC operating agreement which is created by the members and may be tailored to meet their needs. For example, the operating agreement may specify how profits will be distributed and how ownership interests may be disposed of. However, without an operating agreement, the LLC will default to the rules prescribed by the state of formation which are not generally as flexible as the LLCs operating agreement.
LLC members are allowed to participate in the management of the business without losing their personal liability protection. This is in contrast to limited liability partners in a general partnership who may lose their limited liability protection if they participate in the management.
An LLC may be member-managed or manager-managed (managed by nonmembers). When members manage the LLC it is similar to a partnership structure. When nonmembers manage the LLC it is similar to the corporate form organization.
Ownership Not Restricted
Unlike an S corporation, where ownership is restricted to a maximum of 100 shareholders, an LLC may have an unlimited number of owners (called members).