What is a Limited Liability Company?
Limited Liability Companies are a relatively
new business form in the United States, though they have a
long-standing history in Europe. LLCs were first formed in
the United States in 1977, and were granted pass-thru tax
status by the Internal Revenue Service in 1988. As a result,
LLCs can elect to be taxed like partnerships, only at the
individual level when profits are paid as dividends. This
yields a considerable advantage over C corporations, which
are subject to double-taxation: once at the corporate level,
and again at the individual level when profits are paid as
dividends to the shareholders.
Similar to corporations, LLCs shield personal assets from
business debt. Note, however, that LLCs have a limited life
of about 30 years, depending on the state and do not have
stock (and thus do not get the benefit of stock ownership
and sales). Currently all 50 states recognize the LLC business
form. LegalFilings can set up an LLC for you. All you have
to do is provide us with the necessary information on your
order form, and we will take care of the rest!
What filings (papers) are required to
form an LLC?
In order to create an LLC, Articles of Organization
have to be prepared and filed, along with state filing fees
and other initial fees.
Is an attorney required to form an LLC?
No. An attorney is not required for formation
of an LLC. LegalFilings can form an LLC for you and save you
the time and money involved in using an attorney. However,
if you are unsure about what business form is right for you,
it is advisable to consult your attorney.
How many persons are needed to form
an LLC?
Several of the states require only one person
to form an LLC. However, many states require a minimum of
two.
How is the ownership of an LLC evidenced?
An LLC issues certificates indicating the
particular holder?s percentage of ownership in the business.
What is the ownership structure of an
LLC?
An LLC?s owners are termed "members."
A member?s interest in an LLC is represented by "interest"
certificates. An LLC is managed by its members, with each
having a say equal to their percentage of ownership (unless
the members hire managers to operate the business).
What are the differences between an
LLC and an S corporation?
S corporations have restrictions which
are not applied to LLCs. For example, S corporations are limited
to 75 shareholders, while the number of members in an LLC
is not subject to this restriction. Additionally, LLCs cannot
issue stock, but rather, they offer "memberships."
S corporations, on the other hand issue stock and are owned
by the shareholders. S corporations are managed by the directors
and officers, while LLCs are managed directly by the members
unless they hire managers. Furthermore, while S corporations
have an unlimited life span, LLCs have a limited life (in
most cases around 30 years).
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