A LLC or limited liability company is a type of business ownership combining several features of corporation and partnership structures. Many countries allow the typical structures of sole-proprietorship, partnership or corporation for business ownership, but Americans can opt for a LLC. Owners of a LLC are called members, not partners or shareholders, and the number of theses members is unlimited. Members can be individuals, corporations or other LLCs.
One distinct advantage of a limited liability company is that it exists as a separate entity much like a corporation. Therefore members have liability protection and cannot be held personally liable for debts unless they have signed a personal guarantee. Another advantage is that limited liability companies can choose various means of distribution of profits. In a common partnership the split is 50-50, but with a LLC there is much more flexibility. The LLC business structure is also much easier to operate because no corporate minutes or resolutions must be recorded. Finally, all business losses, profits and expenses flow through the company to individual members, and therefore double taxation of corporate as well as individual tax can be avoided.
There are, however, some down sides to limited liability companies. For one, corporations can live forever, but a LLC is dissolved when a member dies or undergoes bankruptcy. It is also important to note that business owners with plans to take their company public may be best served by choosing a corporate business structure. Lastly, running a limited liability company can require more paperwork and complexity than a sole-proprietorship or partnership.
The two main actions involved in setting-up a limited liability company are preparing the Articles of Organization for the company and preparing an operating agreement. Though the latter of these steps is not required, it is advisable.
Starting the process of filing for a LLC is not easy to do without having any experience. Miller|Conway are attorneys in Goose Creek who are skilled in forming LLCs and can answer any questions about the step-by-step process of forming a limited liability company. Please feel free to give us a call at 843.764.3334 if you would like to schedule an appointment to discuss forming a LLC.