A limited liability company (LLC) is a legal business entity which combines the protections afforded corporate shareholders with the tax advantages and freedom of a partnership. State law governs the formation and operation of limited liability companies.
Types of Limited Liability Companies
There are several types of limited liability companies. These differences impact how LLC's are taxed.
- Single Member LLC – A single member LLC is not treated as a separate entity from its member for tax purposes. In other words, the income of the LLC is included on the tax return of the member.
- Multi-Member LLC – A multi-member LLC has more than one member. Unlike a single member LLC, a multi-member LLC is treated as a separate entity for tax purposes. This means that its members enjoy pass through of profits and losses in the same way partners in partnerships do.
- Non-Profit LLC – A non profit LLC enjoys the same tax advantages as a non-profit corporation. It also enjoys the flexibility of a partnership and the protections from liability enjoyed by for profit corporations. Not all states allow non-profit limited liability companies.
- Professional Limited Liability Company (PLLC) – A PLLC is a limited liability company organized for the purpose of providing legal, medical, or other professional services.
- Series LLC – A Series LLC is a special limited liability company which allows a single LLC to segregate its assets into separate series as a means of protecting assets from creditors.
Limited liability companies are sometimes referred to as LLC corporations. However, under the law, there is no such thing as an LLC corporation.
What is a Strategic Alliance?
A strategic alliance is a formal agreement between two or more entities made for the purpose of achieving a specific business goal or meeting an essential business need. During the term of the strategic alliance, each entity remains independent of the other members of the alliance.
Management of a limited liability company may be vested in members or managers as set forth in the Articles of Organization and Operating Agreement. If the management of the LLC is vested in managers, they have the exclusive authority to bind the LLC. A majority vote, as defined in the Operating Agreement, is required before action may be taken by a manager-managed LLC. In this respect, a manager-managed LLC resembles a corporation.
On the other hand, any member of a member-managed LLC may bind the company. In this regard, member-managed LLC's resemble partnerships.
Getting Legal Help
It's important to seek legal advice before deciding on a corporate structure. An experienced business attorney can advice you about the advantages and disadvantages of operating as a sole proprietorship, corporations, partnership, or LLC. Additionally a business attorney can draft all of your corporate documents, ensuring that they comply with state law.
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