LLC Corporation

A limited liability corporation (or LLC corporation) is a relatively new form of business entity that is now permitted in all states. It is a hybrid of a limited partnership and a corporation and provides the best of both worlds, such as ease of formation, tax savings, and liability protection. It is fast becoming a very popular form business entity.

The limited liability corporation is basically a company with corporate liability protection and stockholding capabilities and the tax advantages of a partnership or sole proprietor. Some features of LLC include:

• Personal liability of the owners: Generally no personal liability of the members for the business.
• Taxation: There is no tax at the LLC level, all profits and losses are passed through to the members.
• Business formation: Articles of organization must be prepared and filed with the state. The LLC members must also have an Operating Agreement, but in most states, it can be verbal.
• Membership rules: One member or unlimited number of members are both allowed.
• Management: LLC can be managed by the members or by selected managers. This is usually addressed in the operating agreement.

The advantages of LLCs are:

• Unlimited liability protection.
• Pass-through taxation.
• Flexible ownership and management structure.

The disadvantages of an LLC include:

• More paperwork than partnership.
• May be under more IRS scrutiny.
• May have a limited life span determined by state.