Limited Liability Company (LLC)

Overview

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• An LLC combines the advantage of limited liability protection of a corporation with the advantage of pass-through taxation of a partnership or sole proprietorship.
• An LLC may be managed solely by the owners, called members, or the members may appoint one or more managers to run the business on a daily basis. An LLC is therefore characterized as member-managed or manager-managed.
• An LLC is formed by filing Articles of Organization with the Secretary of State (or equivalent formation agency) in each state.
• An LLC allows members considerable flexibility in determining the organization’s management structure. This is accomplished through a written operating agreement among the members to control matters such as how management will be organized, rights of members, allocation and distribution of profits and losses, and transferability of memberships.
• State LLC Acts provide default provisions that will govern the LLC if the members do not enter into an operating agreement or if the operating agreement is silent on a given topic.
• An LLC has several tax classifications to choose from depending on the number of members, their relationship (as husband and wife) and the formation state.