Choosing The Limited Liability Company As A Business Structure

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There are many different types of business structures a company may use when first starting up: a corporation, partnership or sole proprietor. For those in the US, the limited liability company is another option that is best described as a combination of the partnership and corporation structures. There are no partners in this type of structure, only members and the number of members is unlimited.

One advantage of such a structure is that a limited liability company has all the liability protection found at a corporation. The members of the company cannot be held liable for any debts unless a personal guarantee has been signed. This company structure can choose how to distribute profits. Most partnerships must distribute the profits in a 50-50 spilt, but an LLC has more flexibility on distributions.

Most corporations have to take records of the meeting minutes; this is not required of LLC. There are no corporate resolution records or minutes which makes operation much easier. There are also tax benefits to forming an LLC. All of the profits, expenses and business loses will go through the company and then to the individual members. Therefore members avoid double taxation, as they do not have to pay a corporate and individual tax.

There are a few disadvantages to an y LLC when compared to corporations and other business structures. The LLC dissolves when a member dies or becomes bankrupt. Other type of business structures, such as corporations can last forever. The Limited Liability Company is not necessarily the best choice if the company plans on going public or giving employees shares. The company can still go public but other structures may be easier.

It is possible to form an LLC in any of the 50 states. There are two main steps when forming an LLC: articles of organization and operating agreement. All Limited Liability Companies must file the companys articles of organization and pay the appropriate fees to the Secretary of State. Some, but not all states, will require an operating agreement. This is very similar to partnership agreements and will define the responsibilities, ownership, property sharing and ownership changes of the LLC. Each state will have different specifications as some require a public notification in the paper while other states will have limitation on the which types of companies can form an LLC. In North Dakota farming and banking businesses cannot be an LLC.


About the Author:
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



Article Originally Published On: http://www.articlesnatch.com


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