Limited Liability Company / What Is It?

This combines the benefits of liability
protection in a corporation with a more simplified tax structure like a
partnership. It is similar to an S Corporation without the IRS restrictions.
However, limited liability companies are a relatively new form of business
structure.

What Is A Limited Liability Company (LLC) / Definition of LLC


A LLC is a business entity organized under state law
that offers limited liability like a corporation along with the possibility of "passthrough"
taxation, unless it elects corporate treatment for federal tax purposes.
Therefore, an LLC is a cross between a partnership and a corporation.
An LLC is owned by one or more interest holders called "members" and any member
can exercise management rights. However, an LLC also allows the members to
manage the entity or to designate specific managers who may or may not be members,
to manage the entity as is done in many corporations. Like a corporation, an
LLC has the advantage of "perpetual" existence ó its business operations can continue
despite the death of someone who owns a business interest. Ownership interests
are transferred easily from one member to another.

Liability

As its name implies, the LLC provides limited liability for its owners similar to shareholders
in a corporation. The LLC owner risks only their investment in the business.
Other personal assets are not a risk, unless the owner has personally guaranteed the
debt.

Taxes

Under new IRS regulations, the LLC with more than one member will be taxed as a
partnership unless it elects to be taxed as a corporation and the LLC with only one
member will be disregarded for tax purposes. If it is treated as a
partnership, the LLC's earnings will be apportioned to its owners and taxed at their
personal tax rates, similar to the tax treatment of a limited partnership. However, it
is possible to elect corporate tax treatment, whereby it will be taxed as a corporation.

Administration

The process of creating an LLC closely resembles the process of creating a corporation.
Georgia law requires that "Articles of Organization" be filed with the Secretary
of State. An LLC has an "operating agreement" which, like the agreement of
partnership or LP, determines the conduct of the business, including the rights and
powers of its members, managers, and employees and which generally allows the
members to structure the company's affairs as they see fit, rather than as a statute
requires.

Limited Liability Company (LLC) - Definition



A Limited Liability Company (LLC) is a form of business organization that incorporates components of both a partnership and a corporation. Specifically, this organizational structure is treated like a corporation for state law purposes and thus offers limited liability to its owners. Yet, the limited liability company is treated by the Internal Revenue Service and by the West Virginia Department of Tax and Revenue as a sole proprietor if you have one member or a partnership or corporation for multiple members for income tax purposes.

Advantages of a Limited Liability Company

    * More flexible than a limited partnership or S-Corporation with similar tax advantages.
    * Limited liability to the members.
    * Income is taxable only once at the memberís tax rate.

Disadvantages of a Limited Liability Company

    * Restrictions to transferability.
    * Life of the LLC varies from state to state.
    * Does not have stock therefore not transferable.

Limited Liability Company (LLC)

    * For-profit only.
    * May be fixed term or perpetual.
    * May be single-member or multiple-member company; members may have authority defined in operating agreement.
    * May be member-managed or manager-managed.
    * Members have equal ownership unless otherwise defined by agreement.
    * Company operated under articles of organization. Additional provisions may be provided by operating agreement, or if none is written, then by the             provisions of law.
    * Law provides personal liability protection for members and managers acting in good faith.
    * May be taxed as partnership under federal law, depending on structure.
    * Annual report and attorney-in-fact fee required.
    * File Articles of Organization for Limited Liability Companies.