LLC Disregarded

[Unregistered]

What would be the advantage of a LLC for a sole prop.since they wouldn't be protected for liability purposes.Most people want to form a LLC to protect their personal assets but if the LLC doesn't what other advantage is there to be a LLC

[jimmcg]

Llc

Asset protection rights are generally the province of state law not the IRS Code...However this is a new arena without much court precedent to base presumptions on and the fact that a single member disregarded entity files as a sole proprietor certainly is not helpful for asset protection rights. Until we have more court interpretation and precedent in this area all bets are off!

[Armando Beaujolais]

Taxation as a sole proprietorship for a single-member LLC isn't going to affect liability protection. Under that philosophy you'd have to forget about LLC's filing as partnerships, and you might as well stop using S corporations as well.

You won't see a lot of court interpretation of this issue because it's not necessary. True, personal liability protection through corporations and LLCs is provided at the state level. By definition, how you file your federal tax return doesn't affect liability under state law.

A single-member LLC gets all the liability protection under state law. Filing as Schedule C as a disregarded entity is for tax purposes only.

[taxmandan]

Sole prop vs. LLC

What would be the advantage of a LLC for a sole prop.since they wouldn't be protected for liability purposes.Most people want to form a LLC to protect their personal assets but if the LLC doesn't what other advantage is there to be a LLC

Usually an LLC is for multiple owners as an alternative to incorporation or a partnership. LLC offer several advantages over the partnership form, primarily allowing a non-owner manager, and the ability to separate economic interest from ownership interest in certain circumstances. There aren't many advantages for a single owner business, continuity of existence beyond the owner comes to mind.

LLC have been the "new, new thing" for lawyers since their inception. Toted as a great alternative to incorporating if the business has liability concerns, but urban myths have clouded the issues for many businesses.