Limited Liability Companies (LLC) offer several advantages over corporations and partnerships. They can be registered in a very short time. The process is simple and the costs involved are not high. Basically, the Articles of Organization (in some states referred to as a Certificate of Organization or Certificate of Formation) and Operating Agreement govern the operations of an LLC. They offer a great deal of flexibility in conducting business. Any or all members can directly participate in the running of an LLC. Alternatively, that job can be left to one member or a group of them, or to a manager or managers. The liability of members is limited to the extent of their investment in the LLC, except when a member offers a personal guaranty. In this respect an LLC is similar to a corporation. It has an advantage over a corporation in the matter of taxation. There is no double taxation because the procedure for levying taxes is like that of a partnership or S corporation. The amount realized from the sale of assets of an LLC is not usually taxable; with C corporations it is. There are no limitations on the number of members. Some states even allow single-member LLCs. Transfer of ownership can be done according to the provisions contained in the Articles of Organization or Operating Agreement. Depending on the applicable state law, the lifespan of the organization can be perpetual or for a declared period. An LLC also offers its members assets strong protection from claims and lawsuits. Many changes can be introduced in the structure and operation of an LLC, with the consent of the members. This may not require the filing of additional papers. Members can decide upon the pattern of profit sharing and voting rights in any manner they choose. Unlike a corporation, there is no compulsion to keep minutes of meetings. But maintaining such records can avoid possible misunderstandings and confusion. |
