Limited Liability Companies are a relatively new business form in the United States, though they have a long-standing history in Europe. LLCs were first formed in the United States in 1977, and were granted pass-thru tax status by the Internal Revenue Service in 1988. This section will provide the answers to the most frequently asked questions about Limited Liability Companies.
What is a Limited Liability Company?
The LLC is a distinct business entity. An LLC offers an alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.
As a result, LLC can elect to be taxed like partnerships, only at the individual level when profits are paid as dividends. This yields a considerable advantage over C corporations, which are subject to double-taxation – once at the corporate level, and again at the individual level when profits are paid as dividends to the shareholders.
Similar to corporations, LLC shield personal assets from business debt. Note, however, that LLC have a limited life that varies from state to state and do not have stock (and thus do not get the benefit of stock ownership and sales). Currently all 50 states recognize the LLC business form.
How many people are needed to form an LLC?
As of January 1st, 1999 only two states require two members. These states are: The District of Columbia and Massachusetts.
What is the organizational structure of an LLC?
A LLC is owned by its members. A LLC may be managed by its members (owners) or by selected a manager.
If a LLC is managed by its members, it operates similar to a partnership. Each member has an equal say in the management of the LLC.
If the members choose, they may elect a manager to act in a capacity similar to a corporation’s board of the affairs of the LLC.
Member management, however is the normal default rule of state law.
How is the ownership of an LLC evidenced?
A LLC issues certificates indicating the particular holder’s percentage of ownership in the business. These membership certificates are included in our corporate kit
What are the advantages of an LLC?
LLC offer numerous advantages:
1. Limited Liability: For the members of an LLC, liability is limited to the amount of capital which the member has invested in the LLC. Therefore, members of an LLC are offered the same liability protection as a corporation’s shareholders.
2. Pass-Through Taxation: LLC allow for pass-through taxation. That is, the earnings of a LLC are only taxed once.
3. Flexible Management Structure and Flexible Ownership: LLC are generally free to establish any organizational structure agreed on by its members.
What is a registered agent?
A registered agent provides a registered address for the receipt of service of legal papers and as a local contact for the Secretary of State and other government agencies. The registered agent receives notice of any suits, tax notices, etc. and then forwards them to the LLC.
It is possible for you to act as your own registered agent as long as your registered address is within the state that you are forming the LLC in.
How do I get started?
Upon receiving your completed order, will immediately file the Articles of Organization with the state government.
After your Articles are filed, your LLC should have an organizational meeting where an operating agreement is adopted. We will provide you with the proper Operating Agreement template. Member certificates can be distributed to members and these transactions should be recorded in the LLC ledger. All of this information can be maintained in a limited liability company record book, which is included in the corporate kit that we provide you with our Full or International plan.