Features Of Limited Liability Company

A limited liability company (LLC) is a form of enterprise that has the features of partnership or sole proprietorship and corporation.  The LLC offers limited liability to its owners. The owners of the LLC are described as the members. Individuals, corporations, other LLCs can be members and there can even be a single member. Initially the LLC having single member was not accepted in many states but now they are allowing the formation of the single member LLC. But some states have rules that are differing and a person has to understand the specific rule for the state. Pass through taxation is a benefit that is offered by the LLC. In LLC “limited liability” means protecting the owners from liability for debts or lawsuit. This means only the business assets are in risk not the personal property like the house or car in case the business is facing debt. The profit distribution is flexible in LLC. They have less record keeping and they don’t need corporate minutes. In LLC you can select to be taxed by partnership or corporation or sole proprietorship and so better flexibility.

There is no double taxation and hence it has tax advantage. In LLC there is a combination of the pass through taxation of the partnership and the limited liability of the corporation. The disadvantages of the LLC are in the death of a member of LLC it gets dissolved. A corporate business structure is good and not the LLC in case if the business wants to go public with the company. It may be complex to run a LLC. It maybe difficult to raise the capital since the organizations may be comfortable to invest funds with the corporation. The benefit of flow through taxes gets eliminated as District of Columbia considers LLC as taxable. Many states require LLC to pay the franchise tax or margin tax. This is levied because of the liability benefits enjoyed in LLC. To set up LLC one has to get the articles of organization from the Secretary of State office. After filling the articles of organization form you have to submit it with the required fee. After that the operating agreement is drafted.

Leave a Reply

Your email address will not be published. Required fields are marked *