What is an LLC?
LLC (Limited liability Company) is a
legal form of business company offering liability to its owners. LLC
is suitable for smaller companies with a limited number of owners. An
LLC can choose to be either member managed or manager managed.
LLC is very flexible since the owners
have limited liability for the actions and debts of the company. A
member managed LLC may be governed by a single class of members or
multiple classes of members whereas a manager managed LLC creates a
two-tiered management structure that approximates corporate
governance with the managers having powers similar to corporate
officers and directors.
Introduced in Wyoming in 1977, LLC is a
relatively new form of business organization.
After the IRS agreed in 1988 to give
LLCs partnership tax classifications, legislatures in all 50 states
only adopted LLC laws. In 1993, Missouri first adopted the LLC as a
legal form of business organization.
If taxed as a partnership, LLC use IRS
Form and Schedule SE (Self-Employment Tax). Specified publicly by the
state, LLCs are organized with a document called the “articles of
organization”. Although the specific information in the Articles
of Organization varies from state to state, all LLCs are required to
provide their company name, assign a statutory agent and provide
their purpose of running the business. Also, with regards to filing
the Articles of Organization, the fees vary from state to state.
The Operating Agreement of an LLC is
considered to be of utmost importance because it determines, defines
and apportions members’ rights. Moreover, it is common to have an
operating agreement privately specified by the members. The operating
agreement is a contract among LLC members and LLC governing the
membership, management, operation and distribution of the company’s
income. Members who operate without an operating agreement most
likely get into problems.
The main corporate characteristic is
limited liability whereas the main partnership characteristic is the
availability of pass-through income taxation.
All LLCs are required to have one
member. LLC members are owners of the LLC and a member’s liability
to repay the LLC’s obligations is limited to his or her capital
contribution.
Profits are taxed personally at the
member level using default tax classification.
In some states, LLCs can be set up with
just one natural person.
Globally , companies with limited
liability exist in business law.
About the author
often helps clients get through the process of LLC formation.
He contributes to a site that allows you to setup your LLC through
the internet which can help you save a lot of time and money. If you
are a small business owner who is overwhelmed by the procedure of
incorporating your business, please do not hesitate to visit us. Find
more information at settingupllc.com.
Tags: 50 states, articles of organization, business company, business organization, corporate governance, debts, irs, legislatures, limited liability company, llc members, management operation, management structure, membership management, operating agreement, partnership tax, self employment tax, smaller companies, statutory agent, utmost importance, wyoming
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Tags: 50 states, articles of organization, business company, business organization, corporate governance, debts, irs, legislatures, limited liability company, llc members, management operation, management structure, membership management, operating agreement, partnership tax, self employment tax, smaller companies, statutory agent, utmost importance, wyoming
