What Is a limited liability company (LLC) ?
Asset Protection: LLC
A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship. While the limited liability feature is similar to that of a corporation, the availability of flow-through taxation to the members of an LLC is a feature of partnerships.
Some of the key features of LLCs are:
- They are a separate legal entity from their Members.
- They have the benefit of limited liability for their Members.
- They are taxed as a partnership.
- They have the organisational flexibility of a partnership.
- Their accounting and filing requirements are similar to those of a company.
In most states, an LLC can be created simply by filing the “articles of organization” and paying the required filing fee. This document is also known as a “certificate of organization” or a “certificate of formation”. Some states have an additional requirement of publishing an intention to create an LLC in a local newspaper. Another part of forming an LLC is the operating agreement, which is not compulsory in most states, but is highly recommended. This document explicitly states the rights and responsibilities of the LLC owners.
The “owners” of an LLC are referred to as “members.” Depending on the state, the members can consist of a single individual (one owner), two or more individuals, corporations or other LLCs.
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