 |
 |
Limited Liability Company
A limited liability company (LLC) is a form of fictitious entity. The
LLC has only become available relatively recently. It combines many advantages
of the corporation and of the partnership. It allows the investors and
managers not to be personally liable for debts of the LLC as a corporation
does. It allows for only the investors to pay income tax, not the entity
itself. It is more advantageous than a corporation in that it allows for
a more flexible structure easier to maintain - you can dispense with yearly
board meetings and the like. A disadvantage of an LLC is its newness as
an entity means that no sure guide to certain legal questions exist; also,
sometimes it will not have free transferability of interest and perpetual
existence as a corporation does.
An LLC must have a registered agent in the state where formed and in each
state where authorized to do business. A registered agent is simply an
individual resident or a corporation in the state that consents to receive
service of process should someone want to sue the company.
To maintain recognition of the entity, you must pay annual or semiannual
filing fees to the state of establishment and any other states where "doing
business", you must maintain company records including meetings of
members in accord with an operating agreement, which governs the operations
of the company, you must never co-mingle company funds with your personal
funds, e.g., never use the company check account to pay for personal expenses.
The company should be adequately capitalized also. If you do not keep
these points in order, a court may not recognize the existence of the
entity and hold the investors or managers personally liable for company
debt. This is called piercing the corporate veil. Also, when entering
into any contract, make sure that the manager signs on behalf of the company
rather than personally.
< Back
|
 |
