About Limited Liability Companies (LLCs)
Explanation of LLC
A Limited Liability Company, or LLC for short, is a hybrid business structure that combines the best characteristics of a corporation with the best characteristics of a partnership.
When you form an LLC, you have the limited liability aspects of a corporation, combined with the partnership advantage of pass-through taxation.
Although the LLC is a fairly new form of doing business in the United States, its flexible structure and simple ownership has made it one of the most popular business structures in use today. The LLC is an ideal tool for owners of small companies who are looking for asset protection, but want less complexity and paperwork when running their business.
Tax Treatment
When an election is not made, the IRS will automatically tax the entity as a partnership. This means business losses, profits, and expenses will flow through the company to the individual members.
If you are switching from a sole proprietorship or a partnership, you are already used to receiving pass-through income, so there would be little change in the way you currently file your taxes.
LLC Ownership/Management
The owners of an LLC are called members and act similarly to the shareholders of a corporation. Members can be individuals, corporations, partnerships, or other business entities.
The members are distinctly separate from the LLC, meaning they cannot be held personally responsible for the debts of the company.
An LLC can be member managed or manager managed. Member managed is used when all the members are going to be active participants in the LLC and want to be part of the decision making process. Manager managed could be a member who is elected to manage the LLC or the LLC could choose to hire an outside manager who is not a member of the LLC.
LLC Formation
A Limited Liability Company is required to file Articles of Organization with the Secretary of State in the state in which they wish to form. The members are also required to enter into an Operating Agreement. Some states vary slightly from this standard format. Be sure to check with Laughlin before forming your LLC to be sure you’ve met all the requirements.
Laughlin can assist with the formation of your LLC in any state. It's quick, it's easy and it's affordable. You can also form your LLC on-line in just minutes.
All that we do is submitted and performed with the understanding that we are not engaged in rendering legal, accounting or other such professional service. If legal advice or other expert assistance is required, the services of a professional should be sought.
