LLC Information

What Is A Limited Liability Company (LLC)?

     A Limited Liability Company (LLC) is a fairly new type of legal entity. It is formed by filing a document called "Articles of Organization" with an Official Filing Officer (usually the Secretary of State) of the home state.

     One of the main benefits of an LLC is that its members, like the shareholders of the Corporation, are typically not liable for the LLC's debts except under circumstances similar to the legal theory of piercing the corporate veil to make the shareholders liable for the debts of the Corporation as its alter ego.

     Owners of LLCs are called "Members." An LLC may be owned, in most states, either by a single member or by more than one member. If it is owned by one person, a sole proprietor, it is taxed as a sole proprietorship. If it is owned by one legal entity, such as one corporation, then, for tax purposes, the separateness of the entities is disregarded. If the LLC is owned by more than one member it can be taxed as a partnership.

     The members may be persons, corporations, partnerships, trusts, other LLC's, or any other type of legal entity. Unlike "S" corporations, there are no citizenship or residency requirements for members. The LLC can be operated by the members themselves, or by their designees who are called "Managers."

     Another substantial benefit of an LLC is that, in most states, the failure to hold or to observe formalities or meetings would not be a factor in determining personal liability of a member unless such meetings were expressly required in the company's "Operating Agreement." The Operating Agreements for the LLC's we form are carefully drafted to exclude any requirement of formalities or meetings to minimize the member's personal liability.

     Thus, it would be highly beneficial for a sole proprietor simply to form a Limited Liability Company so that the sole proprietor will no longer be personally liable for his or her company's debts. Similarly, a Corporation or other legal entity might choose to form an LLC for a specific project, thus avoiding personal financial exposure to possible risks of the project.

     If you would like to know more about LLC's call me at my toll-free number 800-782-9051 or email your questions to me. We do our best to answer personally within 24 hours.