What is a limited liability company (LLC)?
Limited liability company (LLC) is a relatively new type of business that started in 1977 in Wyoming. This business structure uses some of the best benefits of several other types of businesses and combines them into one. Like the company C, the owners have limited personal responsibility, but have the tax benefits of the company S and the flexibility of the partnership. This ensures that the owner will never lose more than the amount of money they have invested in the shares. In the case of legal disputes, creditors cannot receive personal assets or savings from individual shareholders. Unlike corporation, LLC does not have to have corporate meetings and maintain minutes. In general, they have less control than corporations that are traded publicly. The money paid to the members is not a taxed before distribution, as with C Corporation. Despite this similarity, there are two great advantages that LLC has above S. With corporations, they require a maximum number of shareholders 100 and it must be individuals. Members in LLC may be corporations and are unlimitedBesides having to be at least two. If any owner leaves, the remaining members must agree to continue business or dissolve.
LLC allows flexibility of administration and distribution of money that is not found in other business forms. The partnership must divide all profits of 50-50. With LLC, profits can be distributed on the basis of agreed proportions that represent the share of each individual in society.
The main disadvantages of LLC are that they cannot live indefinitely and cannot offer public shares. When one member dies or bankruptcy files, the Company has not been died by agreements before the event. The way the profits are freely divided does not allow the sale of the general public. If the company plans to offer public shares in the future, LLC is not the best choice of structure.
There are two basic steps to create LLC. Organizational articles must be filed with the stateSecretary together with the required fees. The operating agreement is not always necessary, but it is a good idea. This agreement provides an idea of how sharing profits, responsibilities and ownership changes will work and offers members a certain level of protection. It is not obliged to have lawyers these documents, although highly recommended.