Limited Liability Companies (LLCs)
The Limited Liability Company or “LLC” is a unique form of business that blends the characteristics of corporations,
partnerships and sole proprietorships into a simple and flexible business structure that many small business owners
In today’s ‘lawsuit-happy’ environment, it’s more important than ever to put a legal shield between you and your creditors.
As a completely separate entity, LLCs separate the owners from the business itself. There is no personal liability for
any LLC debts even if they relate to a contract or tort. The operating agreement can, for the most part, contain any
procedures and rules that the parties desire and once put in place can just sit there maintenance-free. The initial
drafting of the operating agreement is very important because it must comply with state and IRS regulations so that the
LLC will be taxed as a partnership and not as a corporation.
An LLC legally separates the business from its owners (like a corporation), yet it can elect to be treated as a
partnership for tax purposes. In this case, the LLC doesn’t pay any tax itself – the income is passed through to the
owners as with partnerships. The tax rules governing partnerships are more flexible, allowing for more flexibility in
tax planning. It is up to you to be creative and take advantage of every possible tax break you qualify for. Your specific
situation will dictate whether an LLC or a corporation offers the best tax advantages for you.
When you structure your business as an LLC, it is simple to bring new owners (called members) on board, and there is no
limit as to how many can be involved. These additional investors can be individuals, corporations, trusts, and pension
plans, none of which even have to be in the same state or in the U.S. (Of course, you can form either an LLC or a
corporation in pro-business Nevada without ever setting foot in the state).
The LLC structure was formed around the principle of the freedom to contract. This basically means the owners only have
to agree among themselves how the company will be run and the agreement will be held up in court. As an LLC, resolutions,
amendments, meeting minutes, and annual board meetings are not required by law, as they are with corporations. In fact,
in most states, owners of corporations that do not comply with these requirements lose the asset and liability protection
typically provided by a corporate structure. Nevada, though, is unusual in that the corporate veil can only be pierced in
the case of fraud, even if these corporate formalities are not performed. Again, your specific situation will dictate
whether an LLC or a corporation will work best for you.
Like Corporations and other business entities, Limited-Liability Companies do generally require a registered agent
for compliance and statutory purposes. InCorp will be happy to assist in this regard.
Don’t wait to take advantage of the protections the law affords you and your business.
No matter what business structure you choose, it needs to be for the right reasons. Let us help you decide which
business structure is right for you.
Read the book "Limited Liability Companies for Dummies!"
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