Do LLC & LLP Have Stocks?

By Elizabeth Rayne

Stocks are used to raise funds to start a business or build its capital through the sale of shares. However, not all business entities are legally capable of issuing shares of stock. An entity organized as a corporation may have stocks. However, LLPs and LLCs do not have stocks, and instead profits are distributed to the members of the organization.

LLC and LLP Companies

An LLC, or limited liability company, is neither a corporation nor a partnership, but a combination of both. Individuals in an LLC are not personally liable for the debts of the company, and there are fewer tax obligations. Additionally, the company is run and owned by the members of the organization, as opposed to shareholders who are the legal owners of a corporation. An LLP, or limited liability partnership, is quite similar to an LLC, except for the fact that an LLP must have at least two members while an LLC only requires one. Not every state allows for LLC or LLP entities.

Corporations

In contrast to LLPs and LLCs, a corporation is owned by shareholders and run by a board of directors, whom the shareholders appoint. Further, corporations are the only entity that may issue stock. As in LLPs and LLCs, individuals in a corporation are not personally liable for the debts of the company.

Ready to start your LLC? Start an LLC Online Now

Corporate Stock and Shareholders

Stock represents a shareholder's ownership interest in a corporation. A single unit of stock is known as a share and is different from the property and assets of the company, which may fluctuate in quantity and value. Both private and public companies issue shares to shareholders. Shareholders have the right to vote on matters that affect the corporation and receive payments from the corporation in the form of dividends. The board of directors of the corporation determines when and how much the shareholders will receive in dividends. Generally, shares may be freely traded to individuals who are not the owners of the organization, giving the buyer all voting and financial rights.

Distribution of Earnings in an LLC or LLP

In an LLC or LLP, earnings are distributed only to the owners of the organization. In contrast to the dividends that a shareholder of a corporation would receive, owners of an LLC or LLP may receive periodic payments. The amount to be distributed may be determined by the operating agreement, which most LLCs and LLPs create upon formation of the company. Unlike shares or stock in a corporation, ownership rights in an LLC or an LLP may not be freely transferred.

Ready to start your LLC? Start an LLC Online Now
Can I Have a Partner With an LLC?

References

Related articles

Advantages & Disadvantages of an LLC in Iowa

A limited liability company, or LLC, is a form of business association that combines the limited liability benefits of a corporation with the pass-through federal taxation and management flexibility of a partnership. Organizing as an Iowa LLC may be the best choice for a person looking to start a small business in the state; however, while forming an Iowa LLC has many benefits for small business owners, there are also a number of disadvantages.

Tax Differences of LLCs & PCs

A limited liability company is a company, typically with a small number of owners, known as members, that enjoys the same limited liability benefits as a corporation. All states now allow one-member LLCs; some states allow professionals to form professional limited liability companies, or PLLCs. A professional corporation, or PC is a special type of corporation designed for professionals such as lawyers and accountants. LLCs and PCs are taxed quite differently.

Massachusetts LLC Vs. S Corp

An S corporation, or S corp, and a limited liability company, or LLC, are two business entities offering liability protection that people often consider when forming a business in Massachusetts. Both of these business structures restrict the owner's liability to the amount of his investment in the company. There are several differences between the two entities, including how they are formed, how they are taxed and how they must be managed.

LLCs, Corporations, Patents, Attorney Help

Related articles

What Types of Businesses Can Be Converted to an LLC?

All states have either enacted the Uniform Limited Liability Company Act or a law with similar provisions authorizing ...

How to Create an LLC for Investments

Limited liability companies, or LLCs, are flexible business entity structures that have characteristics of a ...

Incorporating Vs. LLC

One of the most important initial decisions in starting a business involves deciding what type of business entity your ...

How to Transfer Ownership of an LLC to a Corporation

Limited liability companies and corporations are both governed by state law. LLCs have members who own the company and ...

Browse by category
Ready to Begin? GET STARTED