LLC stands for Limited Liability Company, which combines aspects of partnerships and corporations. Members are not personally liable for the company’s debts, and taxes are based on the partnership model. An operating agreement is recommended, and the Articles of Organization must be filed with the Secretary of State.
LLC stands for Limited Liability Company. Because it is not a partnership or corporation, the owners of an LLC are not partners or shareholders, they are “members.” Such companies are often referred to as Limited Liability Corporations, but corporation is incorrect and company is the proper term.
An LLC actually combines aspects of partnerships and corporations, so an LLC is less formal and more flexible than a typical corporation, but offers protection and certain advantages that are very similar. For example, members cannot be held personally liable for the company’s debts. Your assets are separate from the LLC’s assets, so they cannot be seized. One of the advantages of an LLC is that taxes are based on the partnership model. Stream taxes are advantageous as members only need to pay taxes on their earnings once instead of paying corporate and individual taxes.
A Limited Liability Company, unlike a corporation, can be made up of as many members as the company wishes to have and does not require bylaws, meetings, or record keeping. Although many states do not require an operating agreement, it is a good idea to have one instead of the usual statutes or contracts.
In corporations, shareholders can transfer shares or their ownership interest, while members of an LLC cannot. The transfer of one’s interest in the company may be contingent on the approval of other members. Also, if a member of an LLC dies, decides to leave, or goes bankrupt, the LLC is generally dissolved, while corporations are not limited by such restrictions.
To establish an LLC, the Articles of Organization must be filed in accordance with state-specific guidelines, and any and all fees must be paid. Articles of organization are generally filed with the Secretary of State. You may want to hire a lawyer to prepare and file the paperwork, or you can do it yourself. In fact, there is reasonably priced software available that will prepare the necessary forms in accordance with your state’s regulations, which you can then file yourself.
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