Why Change an LLC to Perpetual

By William Pirraglia

Because of the relative newness of LLCs -- the first legislation appeared in 1977, and most states adopted the structure in the 1990s -- U.S. states can have different rules and regulations. Originally designed to employ the best features of partnerships and the limited owner liability of corporations, LLCs can be limited in their existence by time or death, disability, or bankruptcy of an owner, known as a member. However, this potentially unsatisfactory feature can be eliminated in most states by designating your LLC as a "perpetual" organization.

Perpetual LLCs Not Addressed in Every State Statute

Initial LLC legislation seldom permitted these organizations to be perpetual. Owners typically had to choose a "life" for their LLCs. The usual life of an LLC was capped at 30 years. As of 2011, most states permit LLCs to last for perpetuity; members must select a term of "perpetual life" in their articles of organization, which is the principal document filed when registering the new company. If your goal is to establish a perpetual LLC, also state this clearly in your operating agreement, which typically supersedes state statutes.

More Like Corporations

Businesses that are organized as a complete alternative to corporations -- which have infinite life -- should normally select the perpetual option. Those organizations that file as LLCs to receive the limited liability protection that is unavailable with partnerships might prefer to specify a time period, particularly if the LLC is formed only for a specific project. If you're planning to have an ongoing business that you hope lasts for perpetuity, like a corporation, choose the perpetual LLC option if available.

Ready to start your LLC? Start an LLC Online Now

Other Reasons

A major drawback with time-limited LLCs is the potential difficulty in replacing members, which is a problem also faced by partnerships. Unless you carefully word your operating agreement to specify how ownership changes will be accomplished, your LLC might self-terminate with the removal, voluntary exit, or death of even one member. Many a successful LLC has suffered severe damage from lack of planning and specific time limits for existence. Most jurisdictions that allow perpetual LLCs have relaxed restrictions that permit you to provide for member replacement and/or functioning with fewer or additional members.

Basic Advantages

If you form an LLC with long-term views of success, you will benefit from creating a perpetual company. You can design your operating agreement much like corporate bylaws that assume infinite existence. You can formulate plans that permit attracting additional investment and owners, stipulate how owners buy and sell their shares in the company, and make long-term organizational plans without regard for a potential dissolution date, meaning liquidation of the company. Should you decide that your LLC should be taxed as a corporation, you have created a perpetual entity that functions like a corporation without the sometimes expensive documentation requirements.

Ready to start your LLC? Start an LLC Online Now
What Are Directors Called in an LLC?



Related articles

Difference Between LLP, LLC and PC

Limited liability partnerships, limited liability companies and professional corporations are hybrid forms of business organization designed to offer liability protection and tax advantages to businesses that may not be suited for traditional incorporation. Knowing the difference between these three similar forms of organization can help you to determine which form best suits your unique business.

Can I Change an LLC From Members to Managers?

A limited liability company is an independent legal entity formed under your state’s laws. If you choose to organize your business as an LLC, you must also decide whether your LLC should be managed by its members or by non-member managers. While it can be a hassle to alter this decision later, you can change your management structure after you start your business.

When Is it Better to Form an LLC Instead of a Corporation?

LLCs and corporations are similar in a number of ways, but LLCs feature distinct advantages and limitations that make them best suited for specific types of organizations. Knowing when it is better to form an LLC instead of a corporation can help you to choose the ideal form of organization for your company.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

Advantages & Disadvantages of a Limited Liability Company

A limited liability company, or LLC, is an entity that offers both advantages and disadvantages to a business owner. ...

Which Is Better: an LLC or an LLP?

Many businesses that want the benefits of corporations without the complex tax rules and expensive startup costs ...

How Does a Limited Liability Company Work?

Limited liability companies (LLCs) are becoming increasingly popular as business entities that provide the limited ...

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, ...

Browse by category
Ready to Begin? GET STARTED