A Limited Liability Company or LLC is a legal entity that limits the liability of its owners. LLC is more suitable for small businesses with a limited number of partners. It is neither a corporation nor a partnership, but combines the benefits of both. The liability of a businessperson is limited to his investment in the LLC. This means that he cannot be held personally liable for company debts unless he has stood a personal guarantee.
There are a number of tax advantages that a limited liability company can benefit from. The tax benefits of are mostly gained through 'pass-through' taxation. In this system the profits from the business are taxed only once and owners need not pay both corporate and personal income tax on their earnings through the LLC business.
Other advantages are that it requires much less paperwork and administration than incorporations. There are minimal requirements for reporting to state and other regulatory bodies, and there is no requirement for board of directors meetings or annual general meetings. All these factors make a limited liability company an attractive business option for many small and medium sized businesses.
Forming a limited liability company is not difficult. You must decide on the name, business and location. The main paper to be filed is the 'Articles of Organization' along with the stipulated fees. The papers should then be submitted to the office of the Secretary of State in the state where the LLC is to be registered.
It is essential for each LLC to have a 'Registered Agent' with a street address in the state where it is registered. The office of the Secretary of State in your state will provide advice and assistance to register a LLC. Professional services are available to complete the entire process within a couple of days for a reasonable charge. All states in the USA permit the registration of a business as a LLC.
Filing with the state authorities can incorporate Limited Liability Company. The general procedure is that of incorporating a corporation. The advantages of a LLC over a corporation are that there is no need to get the consent of shareholders, no need to issue shares and no need for a board of directors. Since Limited Liability Companies are run by the owners, they have their own operating agreement. Once these are decided, filing with the state authorities can incorporate the LLC. Thus the choice of business structure and the incorporation of it are important. Hence, it is advisable to get counsel from a lawyer before incorporating a Limited Liability Company.
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