All You Need to Know about an LLC

Not so long ago, the limited liability company (LLC) was a new kind of legal structure available for small businesses. At that time, LLCs were like the new kid on the block amongst all the other business entities. Since then, it hasn’t just made a place in the market, but has become one of the most popular business entities used by business owners due to its flexibility and liability protection.

Let’s say that you started a small business and ran into some legal issues or got into a huge debt. The liability protection of an LLC would make sure that your personal belongings like your car and house are safe. All the debt will be paid using the business assets only. Without the liability protection, you might end up losing everything you have including the company and the shirt off your back.

Now, you might be thinking that all this just sounds the same as a corporation. And, you are right, to a point. But there are some other things that the LLC offers that a corporation does not, particularly its flexibility. In this post, we will deep-dive into what an LLC is, and how it is a great business entity choice for your business.

What is a Limited Liability Company?

Just like a corporation, a limited liability company is a legal entity separate from its owners. An LLC can easily get its own tax identification number, do business, and even open its own checking account. It is a simple and highly versatile company structure as compared to S-corps and C-corps. In short, it is a legal entity similar to the combination of the following:

  • Corporation in its liability protection
  • Partnership/Sole proprietorship in its taxation

The owners of an LLC are called members and every member of the LLC has liability protection. Generally speaking, there can be an unlimited number of members and anyone can be a member of an LLC, including:

  • Other LLCs
  • Corporations
  • Trusts
  • Partners
  • Individuals

An LLC can be opened in any state. The profits and losses of the company can easily be divided differently among the various entity designations. This means that the LLC members can distribute the earnings using any method they want, unlike s-corporations. In addition to this, limited liability companies do not have to worry about much of the standard documentation that the other corporations have to complete to stay compliant, including shareholder meeting minutes, annual director meetings, and other formalities.

How are LLCs Taxed?

One of the main benefits of starting an LLC is that you get a lot of tax flexibility and benefits. By default, the LLC is taxed as a pass-through entity. This means that it can avoid the double taxation issue that C-corps have, so that the income tax is only paid at the personal level by the members on their personal income tax returns for the earnings made in the company.

Another tax benefit is that the LLC members can easily claim their own share of loss in the business on their income taxes. This is something great for those who have just started up as it helps in saving a lot of tax. But to be able to gain these benefits, you will have to choose to be taxed as an S-corp, which is one of the four tax classifications available for an LLC.

The four tax classifications available to LLCs include: C-corporation, S-corporation, partnership, or disregarded entity (sole proprietorship). Before we can talk about each, you need to know that electing to be taxed as an S-corporation might not be the best choice for your company. You will need to choose the best method that suits your business and its needs. The best way to get around this is by taking the help of a tax lawyer and a business attorney while electing on how you want your LLC to be taxed.

With this said, let us now look into the differences in each tax classification with the help of the table below:

From the table, if you elect to be taxed as a:

  • Disregarded Entity: You can have only one owner of the company and enjoy the pass-through taxation. This means that the company’s earnings would be taxed at the personal level where the owner would report about the profits or losses in their personal income tax returns and pay for the tax on it there. Under this, there are no additional tax filings. In short, you will get the limited liability protection and still be a sole proprietor with the least amount of complications under this tax classification.
  • Partnerships: Here, you can have from two to an infinite number of owners in the company. And since partnerships are also pass-through entities, all the gains and losses would be pass-through and reported in the personal income tax returns of the owners. The rest is the same - you would not have complications and will still be enjoying the limited liability protection since it is an LLC.
  • C-Corporations: You can also be taxed as a C-corporation where you can have any number of owners. But just like C-corporations, you will have to pay the tax twice on the earnings made from the company—once at the corporate level and once at the personal level, which is called double taxation. Along with this, you cannot report any pass-through losses under this election.
  • S-Corporations: Often when a professional practice or consulting small business, like doctors, engineers, accountants, and lawyers, it elects to be taxed as an S-corporation. With this tax election, a company is allowed to have 1 to 100 owners (who must be individuals) and the profits and losses pass-through to the owners who then report them in their personal income tax return. This option also offers additional tax benefits, like lower self-employment and payroll tax.

By default, the federal government taxes a single-owner LLC as a disregarded entity and a multi-owner LLC as a partnership. To get the benefits of being taxed as a C-corporation or an S-corporation, you will have to file for the election using the Form 8832 with the Internal Revenue Service.

Note: Before you make a tax election, you should consult an experienced tax lawyer and your CPA. They will help you make the right choice based on your business plans and future.

Advantages of LLCs

There are a lot of advantages of an LLC, these include:

  • Limited Liability Protection: As shared above as well, an LLC’s main advantage is that it offers limited liability protection to the owners. This means that only the business is responsible for the debts and liabilities that it incurs and not the members of the LLC.
  • Enhanced Credibility: With an LLC behind your company name, people recognize your company as genuine, making it easier to get suppliers, vendors, and even investors.
  • Flexible Profit Distribution: Limited liability companies can easily select the way they want to distribute the profit among themselves.
  • No Residency Requirements: The members of the LLC are not required to be US citizens or a permanent resident here in the USA. This means that a foreigner can easily open an LLC here. But before you do that, consult a business attorney and a tax lawyer to help you make the process smooth.
    • Management & Control Flexibility: LLCs offer the flexibility in choosing how you want the company to be structured. There are usually two kinds of structures you can choose from:
  1. Member-Managed: Any member in the company, regardless of how much of the company they own, can easily sign and bind any contract/document of the company. Let us take an example to understand this - there are 5 owners in the company named Tony, Larry, Mike, Dorothy, and Eliot. Tony owns 35% of the company, Larry owns 25%, Mike owns 20%, Dorothy owns 15% and Eliot owns just 5% of the company. Now, let us say that a very important contract or document is given to Eliot since the other owners are not available, he can easily sign the document as per his choice and bind it. This is even though he has just a small ownership of the company and technically, shouldn’t have so much control over it. Although this can be a good thing for some groups, a lot of people do not find it wise to allow a minority member sign contracts on behalf of the whole company. This is one reason why many corporate attorneys advise to avoid creating this kind of structure.
  2. Manager-Managed: In a manager-managed LLC, the company can appoint its managers to manage the company separate from the owners. These managers (or manager) have the rights to sign on any company documents and contracts and bind the company accordingly. It allows to separate ownership from management of the Company.
  • Minimal Compliance Requirements: Where corporations are required to have annual meetings, record the minutes of the meetings, create bylaws, etc., the LLC does not have such requirements. Compliance with entity formalities are much simpler for an LLC.

The above advantages are the same regardless of the tax classification made for your LLC. But it should be kept in mind that the tax classification election you make will dictate if your company is allowed to enjoy some additional benefits or not, other than those mentioned above. Each of these benefits have been explained in the below table:

#1 Equity Flexibility

#2 Pass-Through Profits & Losses

Disadvantages of LLCs

Just like everything, LLCs come with some trade-offs. These include:

  • Self-employment taxes: An owner of an LLC taxed as either a partnership or disregarded entity will pay self-employment taxes on all profits of the business.
  • Owners Cannot be Employees: If you are the owner of an LLC taxed as either a partnership or disregarded entity, you cannot be an employee of your LLC because you are considered a self-employed owner.
  • Not Attractive to VCs: Due to some tax issues, an LLC taxed as either a partnership or disregarded entity is not considered to be “ideal” for many venture capitalist investors or other institutional investors. Although some are beginning to invest in LLCs, it is still not considered to be ideal by many. This can turn out to be a disadvantage if you are hoping to raise outside funds from venture capital funds or other institutional investors.

Who Can Form an LLC?

Many small business owners choose to open an LLC due to its flexibility, versatile taxation methods, and the many benefits that it comes with. So, the LLC structure is can be perfect for all kinds of businesses including professional practitioners, real estate companies, retail companies, e-commerce businesses, technology companies, etc.

Freeman Lovell LLC offers these services and can help you make your choice. All you need to do is contact us and let us know about your business plan. Based on this, we will guide you in making the right choice. Feel free to reach out to me at josh@freemanlovell.com or text us at (385) 217-5611 to learn more!

Demystifying FMLA

By Adrienne Langmo • September 12, 2025
If you're working for — or running — a business with under 50 employees, the Family and Medical Leave Act (FMLA) might seem like a distant federal regulation. But for eligible employees and covered employers, it’s a powerful tool for balancing work and life during major health or family events. Here's what you need to know. 🧩 The What The FMLA is a federal law that allows eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specific family or medical reasons, including: The birth or adoption of a child Caring for a spouse, child, or parent with a serious health condition Recovering from a serious health condition themselves Certain military-related family needs The leave can be taken intermittently, in blocks, or in one long swath. During FMLA leave, employers must maintain group health benefits as if the employee were still working. When the leave ends, the employee is entitled to return to the same or an equivalent position. 👥 The Who FMLA is mandatory for employers with 50 or more employees within a 75-mile radius. So, if your business has fewer than 50 employees at a given location, you’re not legally required to offer FMLA leave —but you can choose to adopt similar policies voluntarily. Employees must also meet FMLA eligibility criteria: Worked for the employer for at least 12 months Logged at least 1,250 hours in the past year Work at a location with 50+ employees within 75 miles *State employees may have additional benefits provided under state law. Here, we’re discussing private employers and employees. 🛠️ Employer Takeaways Treating employees appropriately during their FMLA leave and upon their return can present some hurdles for employers and coworkers, particularly when an employee has been on leave for some time and, e.g., projects or programs have evolved in their absence. You don’t have to navigate these situations alone; we can provide your team with the tools and information necessary to smoothly navigate the full FMLA process and avoid any sticky FMLA retaliation or interference claims. And, even if you’re not legally bound by FMLA, offering comparable leave can be a smart move. It builds trust, boosts retention, and shows you value your team’s well-being. Consider crafting a voluntary leave policy that mirrors FMLA protections, including: Clear eligibility rules Defined leave duration Job protection guarantees Coordination with paid time off or disability benefits For small businesses, this means you have flexibility—but also responsibility to communicate policies clearly. Want to overhaul those policies or craft great messaging to your team, give us a call! We’re here to make leave policies less painful and more practical. 📣 Employee Takeaways If you work for a small Utah employer, ask about your company’s leave policies. While FMLA doesn’t require you to use your accrued leave during your FMLA leave, it allows your employer to write into its policy a requirement that you do so. Make sure you read that policy! And, even if FMLA doesn’t apply, your employer may offer benefits similar to FMLA. If you’re dealing with a serious health issue or family emergency, document your situation, give notice as early as possible, and follow internal procedures. Need help understanding those procedures or your rights as an employee? We got your back! ⚖️ Final Thoughts FMLA is more than a legal acronym—it’s a lifeline for employees facing life’s biggest challenges. For Utah employers, understanding the law and choosing to offer similar protections can set your business apart. Whether you're an HR manager, CEO, or a team member, knowing your rights and responsibilities helps everyone navigate leave with clarity and compassion.

Moonlighting, Side hustles, and Non-Competes

By Adrienne Langmo • September 3, 2025
So, you’ve got an employee that wants to teach a night class? Drive for a ride share? Pursue a passion project on the side? That’s great…. Right? You can ensure it’s great for both you and your employee by entering a non-compete, non-solicitation, non-disparagement, and/or non-disclosure agreement and setting clear workplace boundaries . Non-Compete Agreements can help employers do damage control when an employee wants to branch out. Non-competes alone are limited, but when properly crafted and paired with the other agreements listed above, they can provide peace of mind and protection to employers. Utah law takes a close look at these agreements when it comes to enforceability, so don’t go it alone when it comes to crafting one. Boundaries Set boundaries with your employees on the use of their time, your equipment, and your company’s other resources like client lists or IP. And pay close attention with remote or telework employees where boundaries may be squishier. Here’s some examples where lines may get blurred: Can the employee use the office printer, or their allotted printing budget for their teaching gig? What if it’s just a couple sheets of paper? What if it’s their 100-page course outline? Maybe. Do you have an equipment policy that allows employees minor personal usage of the office equipment? Does it define “minor”? Might you want to update that policy if it doesn’t provide the clarity you need? We can help! Can the employee pick up a ride share client in the company vehicle while they’re out running an errand for the company What if it’s their personal vehicle? What if the trip is along the way, no deviation? Definitely not the company vehicle for insurance purposes of carrying a random person around. But otherwise, this raises the charmingly titled legal doctrine of “frolic and detour” where it is much less messy in terms of liability (for accidents, etc.) if the employee does not engage in personal errands while on the clock, when they’re supposed to be completing your company’s business. No double dipping. No frolicking, as tempting as frolicking sounds. Can they email one of the company’s clients with a question that’ll help them move things forward on their side project? Generally, probably not, especially if you have a non-solicitation agreement in hand. But, it may depend on more details than this scenario offers. When in doubt, talk about it with your employee, get an idea of what their end game is, and give us a call if you need a sounding board. Need help handling questions like these, updating policies, or putting together a non-compete agreement? We can help!

Beneficial Ownership Rules

December 28, 2023
Starting January 1, 2024, a new rule took effect requiring all registered legal entities, including limited liability companies and corporations, to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). We wanted to give you a heads up about the rule and give you as much information about what it means to you. What is the rule? The rule, which is called the Beneficial Ownership Information Reporting Requirements (BOI Rule) , comes from the Corporate Transparency Act, which was passed by Congress in 2021. This law created the BOI Rule with FinCEN as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other deceitful ownership structures. Under this new law, FinCEN will permit Federal, State, and local officials to obtain ownership information for authorized activities related to national security, law enforcement, and intelligence. When does the rule take effect? And when do I have to submit a report? The BOI Rule took effect on January 1, 2024 . If your company existed before January 1, 2024, you must file its initial beneficial ownership information report by January 1, 2025 . If your company is formed or registered after January 1, 2024, you must file its initial beneficial ownership information report within 90 days after receiving actual or public notice that its creation or registration is effective. If any beneficial ownership information changes, you will have 90 days from the day of the change to file an updated or corrected report with FinCEN. What if I don’t file a Report? According to FinCEN: “The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.” What do I need to include in the report? The BOI Rule requires that all entities report information about the company, each individual with substantial control over the entity, and each beneficial owner. What information is required to report about the entity? Full legal name of your company and any DBAs names; Complete current street address for your company's principal place of business (P.O. boxes will not be accepted); The jurisdiction of formation or registration; and Tax identification: IRS tax identification number (TIN) and employer identification number (EIN). What information is required to report about the controlling individuals and beneficial owners? The individual's legal name; Individual's date of birth; Individual's residential address; and A unique identifying number from an acceptable identification document (such as an unexpired driver's license, passport, identification document issued by a State or local government or Indian tribe) and the name of the issuing state or jurisdiction. Who is considered to have substantial control of the entity? Examples of an individual that exercises substantial control over the entity are: An individual is a senior officer (President, CEO, CFO, COO, Manager, or other office who performs a similar function); An individual has the authority to appoint or remove certain officers or a majority of directors of the reporting company; An individual is an important decision-maker for the company; or An individual has any other form of substantial control over the company. Who is considered a beneficial owner? A beneficial owner is an individual that owns or controls at least 25% of the entity’s ownership interests. This includes individuals that indirectly own or control 25% of the ownership interest. For example, if Joe is a 50% owner of Parent LLC, which in turn owns 50% of Subsidiary Corp, then Joe beneficially owns 25% of Subsidiary Corp (50% of 50% = 25%). What type of entities will be required to file a report with FinCEN? All domestically formed entities and foreign registered entities in the USA are required to file a report. Types of entities include corporations, limited liability companies, limited partnerships, general partnerships, and any other entity registered with a state Secretary of State or Division of Corporations or other similar office. There are some types of companies that are exempt from the reporting rule, and in general they are companies that already have to report beneficial ownership to another federal agency. The 23 exemptions listed by FinCEN are: Securities reporting issuer, Governmental authority, Bank, Credit union, Depository institution holding company, Money services business, Broker or dealer in securities, Securities exchange or clearing agency, Securities exchange or clearing agency, Other Exchange Act registered entity, Investment company or investment adviser, Venture capital fund adviser, Insurance company, State-licensed insurance producer, Commodity Exchange Act registered entity, Accounting firm, Public utility, Financial market utility, Pooled investment vehicle, Tax-exempt entity, Entity assisting a tax-exempt entity, Large operating company, Subsidiary of certain exempt entities, and Inactive entity. Can you help me with my company’s report? Yes! We are happy to help prepare and file your company’s BOI Rule report with FinCEN before the December 31, 2024 deadline. We offer a flat-fee service that is discounted based on how early you pay and submit your information. Sign up for our BOI Rule report service HERE. We also know that some situations can be complicated, so please feel free to ask us any questions regarding compliance with the beneficial ownership interest reporting requirements for your company by emailing teamjosh@freemanlovell.com .