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Limited Liability Company
A limited liability company (LLC) is a company which provides limited liability for its owners. It combines features of a partnership and a corporation. A limited liability company can have unlimited owners, which are known as members.
In order to set up a limited liability company there are two main actions that need to be taken. First, articles of organization need to be filed with the Secretary of State and the required fees need to be paid. Second, it is recommended that an operating agreement be drawn up. This will help define the company’s profit sharing, ownership, and responsibilities.
Forming a limited liability company has its advantages such as, that owners have limited liability. Members can not be held personally liable for any debts because a limited liability company is considered a separate entity. Additionally, all business profits and losses go through the company and not through its members. This way a member prevents double taxation.
A limited liability company also has its disadvantages. A limited liability company has a limited life, meaning that when a member dies or goes bankrupt the company closes. Also, becoming a limited liability company has added paperwork and complexity. For tax purposes, the company may be classified as a sole proprietorship, partnership, or corporation.
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