LLC Characteristics

By Holly Cameron

A limited liability company, or LLC, combines characteristics from both traditional corporations and partnerships. All states in the United States have their own laws regarding incorporation of LLCs, and it is therefore important to check the relevant statutes for your chosen state of incorporation. Despite this, there are a number of characteristics that are common to LLCs in most states.

A limited liability company, or LLC, combines characteristics from both traditional corporations and partnerships. All states in the United States have their own laws regarding incorporation of LLCs, and it is therefore important to check the relevant statutes for your chosen state of incorporation. Despite this, there are a number of characteristics that are common to LLCs in most states.

Limited Liability

As the name suggests, one of the key characteristics of an LLC is that the liability of the members is, in general, limited to the extent of their personal investment in the business. This means that the members cannot be personally sued for the debts of the company over and above the amount of their individual investment. There are exceptions, however, when a member may be deemed to be personally liable -- for example, if he has guaranteed a loan in a personal capacity.

Ready to start your LLC? Start an LLC Online Now

Taxation

The LLC itself as a legal entity is not taxed in most states. Members pay taxes on their individual profits. In practice, this means that members may, if they choose, transfer some of the profits back into the business, thus reducing their tax bill. In certain jurisdictions, the members of an LLC can elect to choose their business entity classification for tax purposes. An LLC must be structured carefully in order to ensure tax advantages, so it's a good idea to get advice from professionals before you start your LLC.

Operational Flexibility

An LLC may have an unlimited number of members, and all members are allowed to participate in the management of the business. Anyone can be a member of an LLC, including individuals, corporations and even other LLCs in certain circumstances. In many states, LLCs can be incorporated with just one member, making the business entity available to small businesses and sole proprietors. Members are permitted to assign their interests to others, with the only obligation being to notify the relevant state department. Unless the LLC Articles of Organization state otherwise, all members are deemed to be managers of the company.

Reduced Administration

The traditional form of corporation requires a number of administrative formalities to be carried out on a regular basis by the members. These requirements are reduced for LLCs in many states. For example, annual general meetings are usually not required. Most LLCs appoint a registered agent for the serving of process, meaning that person or entity will receive any type of legal communication regarding the LLC. An LLC must maintain a registered office in the state of incorporation, but this does not need to be a place of business of the company itself.

Ready to start your LLC? Start an LLC Online Now
What's an LLC?

References

Related articles

Define Limited Liability Company

A limited liability company, or LLC, is a type of business structure. Sometimes referred to as a hybrid, LLCs draw positive features from partnerships and corporations, blending them into an arrangement that often appeals to small and large companies. Each state has its own regulations for this type of structure, but many defining elements are consistent throughout the country.

How Does a Limited Liability Company Work?

Limited liability companies (LLCs) are becoming increasingly popular as business entities that provide the limited liability advantages of corporations without the double taxation and all the formalities. While an LLC is frequently cast as a quick and easy alternative to incorporation and a safe alternative to sole proprietorship or partnership, before starting an LLC an entrepreneur should understand how the form works.

What Are the Tax Advantages of LLCs?

A limited liability company, or LLC, is a business entity that has the advantage of offering personal liability protection for its members: LLC members cannot be held personally liable for the debts or obligations of the company. LLCs are also attractive to new business owners because LLCs enjoy many tax advantages as compared to other entities such as corporations and partnerships.

LLCs, Corporations, Patents, Attorney Help

Related articles

What Does LLC Mean in a Business?

A limited liability company, or LLC, is a type of business structure where the owners or partners -- called members -- ...

Can I Have a Partner With an LLC?

A Limited Liability Company is a common business entity that may be owned and managed by one or more individuals. LLCs, ...

Why Choose an LLC?

The LLC is a form of business organization that combines elements of corporations and partnerships. It is designed to ...

Florida Corporation Types

Selecting a business entity in Florida, or any other state, is an important decision. There are four types of ...

Browse by category
Ready to Begin? GET STARTED