Limited Liability Company (LLC)
Â This form of incorporation offers the protection of personal assets that sole proprietorships or partnerships do not.Â LLCs are perfect for startup businesses, venture capitalists and high-tech companies dealing with high risk.Â LLCs offer the pass-through of losses while it protects its members.
This is helpful if you fear the repercussions of some of your business dealings, or if you’re in a business with more than one person – since one person may not make wise decisions regarding the business.
Â Without this protection, you could be held liable if someone else made a poor decision – and your personal assets could be confiscated to pay a claimant or repay a debt.
Â As a limited liability corporation, even if the company goes bankrupt, your personal assets are protected.Â The most that would be lost is your initial investment into the company as a shareholder.
Â An LLC is sort of like a mix between a partnership and a corporation.Â You get the same treatment of a partnership when it comes to taxes, but you also get the protection of a corporation.
Â Most states require that an LLC has at least two members.Â Some states, however, are beginning to loosen up their restrictions and allow individuals to form LLCs on their own.
Â The LLC is not merged or fused together with the identity of its members, as in a sole proprietorship or general partnership.Â It is legally recognized as its own entity.
Â Still, there may be instances where a person is liable for the corporation.Â For instance, if the LLC is new and has no history of credit, the vendor may need a Guarantor Liability signer, which requires one person to be liable for the transaction.
Â With an LLC, all of the members have control unless you specify otherwise in the Articles of Incorporation.Â Voting power is usually parallel to the amount of interest in profits the voter has.
Â If a new member is to be brought on board, or someone’s interest in the company is being transferred to another person, then the existing members must agree to it in a majority vote.Â
Â LLCs used to have a limited shelf life, but today, more states are allowing perpetual existence of an LLC.Â It dissolves when a member dies, withdraws, resigns, or is expelled unless the majority votes to keep it going.Â
Â To form an LLC, you have to file your Articles of Incorporation with the Secretary of State.Â LLC owners can be foreigners, other corporations, or a trust and can have an unlimited number of members.Â