7 LLC Industry Types You Should Know About
If you are thinking of starting a business, you might have heard of the term LLC. LLC stands for limited liability company, and it is a popular business structure that offers several benefits to its owners. But what exactly is an LLC, and what types of industries can form one? In this article, we will answer these questions and more.
What Is an LLC?
An LLC is a hybrid entity that combines the features of a corporation and a partnership. An LLC has one or more owners, called members, who can be individuals, corporations, or other entities. An LLC protects its members from personal liability for the debts and obligations of the business, just like a corporation. However, unlike a corporation, an LLC does not pay taxes on its profits at the entity level. Instead, the profits and losses of the LLC are passed through to the members, who report them on their personal tax returns. This way, an LLC avoids double taxation.
An LLC also offers flexibility in how it is managed and taxed. An LLC can choose to be managed by its members or by one or more managers. An LLC can also elect to be taxed as a sole proprietorship, a partnership, a C corporation, or an S corporation, depending on its number of members and preferences.
What Types of Industries Can Form an LLC?
There are many types of industries that can benefit from forming an LLC. However, some states may restrict certain professions from forming an LLC or require them to form a special type of LLC called a professional LLC (PLLC). A PLLC is similar to an LLC, except that it is designed for licensed professionals, such as doctors, lawyers, accountants, engineers, or architects. A PLLC may have additional requirements and regulations to comply with.
Here are some examples of industries that can form an LLC or a PLLC:
– Agriculture & Forestry/Wildlife: This industry includes businesses that are involved in farming, fishing, hunting, landscaping, lawn care, pest control, and other related activities. An LLC can provide liability protection and tax flexibility for these businesses.
– Business & Information: This industry includes businesses that provide consulting, marketing, advertising, online services, publishing, record production, telemarketing, travel agency, video production, and other related services. An LLC can help these businesses reduce their legal risks and optimize their tax situation.
– Construction/Utilities/Contracting: This industry includes businesses that are involved in building construction, remodeling, repair, maintenance, engineering, drafting, equipment rental, plumbing, heating, cooling, and other related activities. An LLC can shield these businesses from potential lawsuits and claims arising from their work.
– Education: This industry includes businesses that provide child care services, private schools, colleges, universities,
cosmetology schools,
GED certification,
real estate schools,
and other related services. An LLC can protect these businesses from personal liability for their educational activities and allow them to choose their tax classification.
– Health Services: This industry includes businesses that provide medical services,
dental services,
veterinary services,
physical therapy,
chiropractic services,
mental health services,
and other related services. These businesses may need to form a PLLC if they are licensed professionals in their state. A PLLC can offer them liability protection and tax advantages.
– Retail Sales: This industry includes businesses that sell goods or merchandise to the public,
such as clothing stores,
bookstores,
jewelry stores,
pet stores,
grocery stores,
and other related businesses. An LLC can help these businesses limit their exposure to lawsuits and claims from customers and suppliers.
– Technology Services: This industry includes businesses that provide software development,
web design,
graphic design,
computer repair,
IT consulting,
and other related services. An LLC can help these businesses protect their intellectual property and reduce their tax burden.
These are just some examples of industries that can form an LLC or a PLLC. There may be other industries that are suitable for this business structure as well. If you are interested in forming an LLC or a PLLC for your business,
you should consult with a qualified attorney or accountant who can advise you on the best option for your specific situation.
Trends in LLC Industry Types
Demand for Technology Services LLCs
One of the most popular and profitable types of LLCs is the technology services LLC. This type of LLC provides various services related to information technology, such as software development, web design, data analysis, cybersecurity, cloud computing, etc. According to the U.S. Small Business Administration, technology services LLCs are among the fastest-growing industries in the U.S., with an annual growth rate of 18% from 2016 to 2026. The demand for technology services LLCs is driven by the increasing reliance on digital technologies in various sectors, such as e-commerce, education, health care, finance, entertainment, etc. Technology services LLCs benefit from the flexibility and protection of the LLC structure, as well as the availability of flow-through taxation to avoid double taxation.
Decline of Construction/Utilities/Contracting LLCs
Another type of LLC that has been affected by the changing market conditions is the construction/utilities/contracting LLC. This type of LLC provides services related to building construction, engineering, plumbing, remodeling, repair, etc. According to Investopedia, construction/utilities/contracting LLCs are among the slowest-growing industries in the U.S., with an annual growth rate of -3% from 2016 to 2026. The decline of construction/utilities/contracting LLCs is attributed to the reduced demand for new construction projects due to the economic downturn, environmental regulations, labor shortages, and competition from foreign contractors. Construction/utilities/contracting LLCs face challenges such as high liability risks, complex licensing requirements, and variable income streams.
References:
https://www.irs.gov/pub/irs-tege/eotopich00.pdf
https://www.irs.gov/pub/irs-pdf/iss4.pdf
https://www.irs.gov/pub/irs-pdf/f8832.pdf
https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
https://www.investopedia.com/terms/l/llc.asp
https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
https://www.investopedia.com/terms/l/llc.asp
https://www.upcounsel.com/what-type-of-business-is-a-llc
https://www.contractscounsel.com/b/types-of-llc
https://smallbusiness.chron.com/types-industries-allowed-llc-17237.html
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