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Alabama LLC
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A limited liability company (LLC):
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.
- An LLC is a type of business ownership combining several features of corporation and partnership structures
- An LLC is not a corporation or a partnership
- An LLC may be called a limited liability corporation, the correct terminology is limited liability company
- owners are called members not partners or shareholders
- number of members are unlimited and may be individuals, corporations, or other LLC's
Advantages and Disadvantages of LLC
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of LLC
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
Alabama's 2012 Business Tax Climate Ranks 20th
Alabama ranks 20th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.Tax Freedom Day Arrives on April 2 in Alabama
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Alabama taxpayers work until April 2 (ranked 43rd highest nationally), celebrating tax freedom a ten days before national Tax Freedom Day (April 12).Alabama's State and Local Tax Burden Below National Average
During the past three decades, Alabama's state and local tax burden has been consistently below average. Alabama's 2009 tax burden of 8.5% of income is below the national average of 9.8%. Alabama's tax burden has decreased overall from 9.0% (39th nationally) in 1977 to 8.5% (40th nationally) in 2009. Alabama taxpayers pay $2,967 per capita in state and local taxes.2012 State Business Tax Climate Index, Ninth Edition
Alabama's Individual Income Tax SystemAlabama's personal income tax system consists of three separate brackets with a top rate of 5% kicking in at an income level of $3,000. That top rate ranks 31st highest among states levying an individual income tax. Alabama's 2009 state-level individual income tax collections were $567 per person, which ranked 37th highest nationally.Alabama's Corporate Income Tax System
Alabama's corporate tax structure consists of a flat rate of 6.5% on all corporate income. Among states levying corporate income taxes, Alabama's rate ranks 29th highest nationally. In FY2009, state-level corporate tax collections (excluding local taxes) were $105 per capita, which ranked 26th highest among states that tax corporate income.Alabama Sales and Excise Taxes
Alabama levies a 4% general sales or use tax on consumers, which is below the national median of 5.85%, but localities are permitted to levy their own high sales taxes. 2007 combined state and local general and selective sales tax collections were $1,391 per person, which ranked 23rd highest nationally. Alabama's gasoline tax stands at $0.209 per gallon (35th nationally), while its cigarette tax stands at $0.425 per pack of twenty (45th nationally). Additionally, municipalities in Alabama have the authority to levy their own "local option" taxes on gasoline. The sales tax was adopted in 1936, the gasoline tax in 1923 and the cigarette tax in 1935.Alabama Property Tax Collections Lowest in Nation
Alabama collects very little in property taxes compared to most other states. Alabama's localities collected $367.47 per capita in fiscal year 2006, the latest year for which the Census Bureau has released state-by-state data. The state government collected $54.63 per capita in property taxes, meaning Alabama's combined state and local property tax collection figure was $422.10 per capita in FY 2006-the lowest property tax collections in the nation.| Alabama Corporate Tax Rate
Alabama Corporate Licensing
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