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Limited Liability Company

Limited liability companies are a hybrid business structure that provides limited liability for members like a corporation but allows for flexible management and taxation like a partnership. They are formed by filing articles of organization and an operating agreement that defines roles of members and managers as well as financial and ownership aspects. This allows LLCs to provide both liability protection and tax benefits to business owners.

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133 views12 pages

Limited Liability Company

Limited liability companies are a hybrid business structure that provides limited liability for members like a corporation but allows for flexible management and taxation like a partnership. They are formed by filing articles of organization and an operating agreement that defines roles of members and managers as well as financial and ownership aspects. This allows LLCs to provide both liability protection and tax benefits to business owners.

Uploaded by

Dumitru Todica
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Limited Liability

Companies

Introduction

A limited liability company is a cross between a partnership


and a corporation, owned by members who may manage the
company directly or delegate to officers or managers who are
similar to a corporations directors.

A limited liability company is a hybrid between corporations and partnerships, with


all of the advantages of limited partnerships and none of its disadvantages.

The limited liability company was designed as a vehicle to keep the attractions of a
limited partnership while avoiding its downside: liability for the general partners.

Organization of a
Limited Liability Company

Limited liability companies do not have


general partners.

Instead, the persons responsible for the


day-to-day management of the business are
referred to as managers.

The investors in the business are called


members.

The

members have voting rights about business


decisions and are permitted to take an active role in
the operation of the business.

Managers

They

may also be members.

all enjoy the protection of limited liability, so


there is no practical reason to bar managers from also
investing in the business as members.

Advantages of Limited
Liability Companies

Limited liability companies enjoy certain


advantages over the corporate model.

The way that taxes are assessed against limited


liability companies is different from the method
used to assess taxes against corporations.

Limited liability companies offer great flexibility to


their owners and protection for everyone involved
in the enterprise.

Creation of a Limited
Liability Company

Depending on the state, the regulations


concerning the creation, day-to-day
operation, and dissolution of limited
liability companies can vary considerably.

Many states enacted tax legislation to


encourage companies to form their limited
liability companies in their states.

Creating

a limited liability company is a relatively


simple process involving filing appropriate
documentation, such as the articles of organization
and name reservation forms.

In

addition, the parties will also draft an operating


agreement.

Limited Liability Companies as


Creatures of Statutes

This business structure derives exclusively


from state statutes, and the statutes must be
closely followed in order to create a viable
limited liability company.

There is no common law of limited liability


companies.

Operating Agreement
The

operating agreement forms the


entire framework for all interactions
between members in a LLC.

The

agreement sets out the many issues


involved in creating, running, and
eventually dissolving the business.

Any operating agreement should address the


following issues:
Finance

and management

Members percentage

of interest in the LLC

Members'

rights and responsibilities

Members'

voting power

Allocation
Rules

of profits and losses

for meetings and votes

Transfer

issues

Summary

Limited liability companies can terminate in several different


ways.

The operating agreement may set a specific date of termination


of the business, or the company may terminate upon the death
or bankruptcy of a member.

Limited liability companies have great flexibility in their dayto-day operation, but they do have some limitations.

For instance, the business must contain the words "limited


liability company" or the abbreviation LLC in order to be
considered a valid legal entity.

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