Limited Liability Company (LLC) – Some Advantages

Limited Liability Company (LLC) is basically a new type of business organization structure. It was started in Wyoming in 1977. This type of business structure is neither a partnership nor a corporation. However, it consists of features and benefits of both of these. The individuals involved in the setup of a limited liability company are known as its members and not shareholders. What gives this type of business organization its name is the fact that the liability of members is limited to their investment in the limited liability company. This implies that that they are not liable for paying off the debts incurred by the company.

The laws and other rules governing the setup of limited liability company differ from state to state. There may be cases in which the LLC has only one member. In that case the sole member will be viewed as the entity performing the activities of the LLC. However the LLC having multiple members avoids the double taxation because the members are the partners for the purpose of taxes.

Image Credits: http://secstates.net

There are various advantages of the limited liability company over the corporations and the partnerships ventures. Some of the most important ones are tax advantages and limited liability. Apart from these two the LLC have more flexibility when developing a management and ownership structure. The benefits related to tax of a limited liability company are gained through the pass-through taxation method. In this the profits from the business will be taxed only once and the owners are not required to pay both the personal and the corporate income tax on the income of the business.

The other benefit is limited liability. This means that it limits the owner’s liability to the amount of money that he/they have invested in the company. Any kind of responsibility of debts above the invested amounts are the liability of the corporate entity and not the ownership group.

The third advantage its flexibility. It provides appropriate flexibility to business owners to develop their own management structure and ownership system. The members can themselves decide on the management type they desire. It may happen that all the members or a small group or a single member can run the company. In addition to it an outsider can also be appointed for managing the activities of the company. However, the management parameters are basically set out in a document called the operating agreement. Apart from these one of the most important advantages of LLC is that it is really easy and simple to operate than other forms of registration.

Limited liability company (LLC) can be ideal and perfect for various types of businesses. In fact it has become the strongest asset protection device for your business. Due to all these reasons the limited liability company structure is gaining importance and popularity in today’s competitive as well as fluctuating business world.

Limited Liability Company Rules-Some Details

A limited liability company is the modern way of doing business. A limited liability company is a unique combination of top-notch characteristics of the corporations, sole proprietorships and partnerships. A limited liability company or a LLC is simple to run and provides a good flexibility. LLCs have been in existence for a long time in various states. The limited liability company rules are different for every state. But, there exist some common rulings too among the various laws of different states. The LLC laws were enacted in different years in different states. For example, the LLC laws were enacted in the year 1993 in Alabama, in 1994 in Alaska, in 1990 in Kansas, and so on. There have also been some changes in the limited liability company rules.

Lets take up a live example of limited liability rule in New York City. One of the new limited liability company rules that has been in effect since 1st June, 2006 is related to the publication requirements. These requirements have been modified for the betterment of the companies. The new law states that a notice has to be published in the newspapers of that state where the company’s office is to be established. This notice should appear in the newspapers once a week and it should continue for 4 consecutive weeks.

If in case the LLC owner fails to fulfill the above mentioned publication requirements inside 120 days of the date of its creation; the authority of that limited liability company of doing business & conducting transactions of any type in New York shall be suspended until the LLC owner does completes the formalities pertaining to the publication. Many people are extremely negligent in completing these requirements as they are worried about the publication cost. But, not meeting the LLC rules can cause serious harm to you and your business. Hence, it is always recommended to complete the limited liability company rules of publications in due time.

This is just a basic rule for the limited liability companies. Each and every stair which you need to climb for setting up the limited liability company has some rules associated with it. Without fulfilling these rules you cannot establish and do business. Another common LLC rule is for naming the LLC. As per the state laws a comma may or may not be used in a LLC name. The LLC name must clearly specify that the company is a limited liability one by including the words Limited Liability Company or LLC or L.L.C., etc. Also the company’s name must be different from the existing and registered LLC’s names.

The limited liability company rules are very large in number. In order for complete information, it is highly important and recommended to you to contact your state’s agent and/or office that deals with limited liability companies.