An LLC actually combines aspects of partnerships and corporations, so an LLC is less formal and more flexible than a typical corporation, yet offers protection as well as certain advantages that are much the same. For example, members cannot be found personally liable for company debts. Their assets are separate from the assets of the LLC so they cannot be seized. One of the advantages of an LLC is that taxation is based on the partnership model. Flow-through taxation is advantageous since members are only required to pay taxes on their earnings once instead of paying both 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 it does not require bylaws, meetings, or the recording of minutes. While many states do not demand an operating agreement, it is a good idea to have one in place of the usual bylaws or contracts.
In corporations, shareholders may transfer stock or their interest in ownership, while members of an LLC cannot. Transferring one’s interest in the company may be dependent on the approval of other members. In addition, if a member of an LLC passes away, decides to leave, or goes bankrupt, the LLC is usually dissolved, while corporations are not limited by such restrictions.
To set up an LLC, Articles of Organization must be filed according to state specific guidelines, and any and all fees must be paid. Articles of Organization are usually filed with the Secretary of State. You may wish to hire an attorney to prepare and file the paperwork, or you can do it on your own. In fact, there is reasonably priced software available that will prepare the necessary forms according to your state’s regulations, which you can then file yourself.