Forming A Limited Liability Company
Author : Mark Thomas
As a business owner, there are a number of decisions you will have to make concerning your operations. One would be the business structure for the company formation. The most common structures include sole-proprietorship, partnership or even corporation. However, in the US, one can form a Limited Liability Company (LLC).
This is a unique business structure which combines some aspects of partnership and corporation structures. Sometimes wrongly called Limited Liability Corporation, this structure is widely accepted in all the 50 states. It is neither a partnership nor a corporation but borrows features from each structure.
Unlike in partnership, the owners of an LLC are not partners but members. They are also not considered stakeholders like in the case of corporations. There is no limit to the number of members who can constitute a Limited Liability Company and they may be individuals or other LLCs.
A Limited Liability Company has a number of advantages that a small business can cash in on. One of the benefits is that the members have liability protection from all or some of the debts that may concern the company. This is similar to the corporation structure with the only variation that a member can sign a personal guarantee making him or her liable.
Unlike for partnership structure where the profits are split 50-50, a Limited Liability Company has flexibility in the profit distribution. The members can decide how best to share their spoils at the end of the day. This flexibility is also available when it comes to classifying the business for taxation. An LLC can be taxed as a partnership or corporation. This can work well for small businesses burdened by heavy taxes as sole proprietorships.
The operations of a Limited Liability Company are quite easy and simple considering that it does not require several bureaucratic processes. Unlike partnerships or corporations where partners and stakeholders hold occasional meetings, keep minutes and record resolutions, an LLC does not require any of these. No formal records needed as such in the operation of this company making it simpler to control. However, this may turn out to be of a significant disadvantage too.
The Limited Liability Company structure also has a limited life time unlike corporations which can last for years. If a member dies or runs bankrupt, the company is dissolved. That not withstanding, one can still form an LLC in any state and benefit effectively. Just find out the regulations in state regarding how to form an LLC before you begin.
Mark Thomas has served in a wide variety of corporate and entrepreneurial roles and now enjoys mentoring those who want to start their own business by consulting on how to start a limited liability company or incorporate online. For more on these topics, visit us at EZonlineFiling.com