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| LLC (LIMITED LIABILITY COMPANY) | |||
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DEFINITION |
A Limited Liability
Company (LLC) is a structure formed under state law. Unlike the
partners in a partnership, none of the members of an LLC are personally
liable for its debts. An LLC can be classified as either a
partnership or a corporation for income tax purposes. It is
classified as a partnership if it has no more than two of the following
corporate characteristics: (1) centralization of management, (2)
continuity of life, (3) free transferability of ownership, and (4) limited
liability. LLC's are composed of members who may participate in the management of the company. These members have limited liability like a shareholder of a corporation or a limited partner and may select a "manager" to manage all or some of the business of the company. You may want to consider this structure for your business if you want to limit your responsibility as an owner (limited liability). An LLC is also more flexible than a "s" corporation because there is no limit to the number of members, there may be more that one class of members, and partnerships, corporations, and individuals may be members. You may want to pass on this structure because it can be costly to form since you most likely need the assistance of an attorney. Also, many of the tax and legal implications are still being developed, and you must give up two advantages of a corporation as stated above. |
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