Limited Liability Company – LLC

The LLC has become the most popular choice to incorporate because it provides limited liability protection, is easier and more flexible to operate, and has fewer formalities. Personal liability is limited to the amount of capital invested by the member in the LLC. Members of an LLC receive the same liability protection as a corporation's shareholders. LLC's are usually free to establish most any organizational structure agreed on by its' members.

The LLC is a specific business entity which is an alternative to partnerships and other types of corporations. The LLC can be taxed as a partnership when the LLC registers with The Secretary of State as a LLC Partnership and subsequently files their tax return in said manner with the IRS. The earnings of an LLC Partnership will only be taxed once. The LLC will issue a certificate to each member indicating the percentage of ownership in the business.

You will need to prepare and file your "Articles of Organization" and pay the state registration fees to your state's Secretary of State, Division of Corporations. This can be accomplished without hiring a legal advisor, if you choose. In most states, registering an LLC can be submitted on line, but requires mailing the appropriate paperwork to the Secretary of State. Your state's Secretary of State website can be located by searching through any of the major search engines.

LLC's are owned by its' members and can be managed by its' members or by electing a manager at a member's meeting. LLC's that are managed by its' members operate similarly to a partnership. When the members choose to manage the LLC then each member has equal rights in the management of the LLC. Member management is the "default" rule of state law.

At the time the LLC is filing the "Articles of Organization" it will need to choose a "registered agent". The "registered agent" is the contact person for the LLC. The "registered agent" is designated to receive all correspondence for the LLC such as any legal notifications, tax information and notices, and any notices from The Secretary of State and other government agencies. The "registered agent" forwards any correspondence to the LLC. The "registered agent" must provide an address for all correspondence to be sent. The "registered agent" can be a member, the manager or another individual, if so decided by the members, such as a CPA, etc.

If the LLC is incorporating in a different state such as Delaware and Nevada then the LLC will need to contract with a company that provides "registered agent" services. A qualified "registered agent" services company can be found by searching on the Internet. There are many to choose from.

Once the "Articles of Organization" are filed, the members of the LLC will need to have an organizational meeting and adopt an "operating agreement". The member's certificates are distributed at the organizational meeting. A designated member or the manager should record all transactions in the LLC's ledger.

Disclaimer: The information in this article is meant to serve as general information and is not intended to be relied on for legal purposes, since laws may change, and laws can vary from state to state.