Do I need two members?
Many states allow for the creation of single-member LLCs. Other states require two or more members. It is important to remember that the IRS may apply different tax liabilities to a LLC with only one member (taxed as a corporation or disregarded entity for tax purposes) than it does to an LLC with more than one member (taxed as a partnership by default).
Must I hold LLC meetings?
In many states, an LLC is not required to hold the simple member/manager meetings in order to maintain the protection provided against liability as are required by officers/directors and shareholders of corporations. For example, California does not require member/manager meetings unless the LLC’s Articles of Organization specifically require them.
Who votes in an LLC?
In most cases, voting rights are proportional to the percentage of membership(“ownership”) interest. However, the articles of organization or operating agreement may establish a different set of criteria for voting rights
Can I sell Member Shares?
Typically, member shares may be sold only upon the approval of members holding a majority in interest, unless otherwise stipulated by the articles of organization or the operating agreement.
How long does an LLC endure?
Many states now allow an LLC to have a perpetual existence. In the past LLC’s were required to provide a date on which the LLC’s existence would terminate. In most cases, unless otherwise provided in the articles of organization or a written operating agreement, an LLC is suspended upon death, withdrawal, resignation, or bankruptcy of a member, with some exceptions.
Do I need an Operating Agreement?
Yes, the complete the creation of an LLC includes the drafting of an Operating Agreement. The Operating Agreement must be created, either prior to or directly after the filing of the Article of Organization. An Operating Agreement may be either oral or written.
What paper work is required to form an LLC?
The Articles of Organization must be legally drafted and filed with the state office. Initial fees must also be paid at this time.
What are the advantages of a LLC?
An LLC is a combination of the best aspects of a partnership and a corporation. LLCs provide liability protection for member/owners (with a few exceptions), establishing a separate entity from the individual member/owners. However, an LLC does not require all the formalities of its managers and members that are required for a corporation. Additionally, many states allow the formation of single-member LLCs.
What are the disadvantages of a LLC?
There is no reliable continuity. If a member is dismissed, dies, is disabled or resigns, the LLC is dissolved unless the Articles of Organization or Operating Agreement state otherwise. When the LLC is formed, some states require that a date for the future dissolution of the LLC be recorded. On the other hand, a corporation would continue to exist as an entity in the event of the death, disability or dismissal of a director(s) or officer(s). There a great deal of paperwork involved in the creation LLC. Lawyers Limited prides itself on making this process as expeditious and efficient as possible. If you are considering an LLC, please contact our associates to discuss how we can help you.
Should I choose an LLC or an S corporation?
Lawyers Limited cannot offer advice regarding your choice to file for LLC or an S corporation. This decision depends on your individual business and financial structure and situation. If you have questions regarding this you should contact a financial professional or an attorney. An S corporation avoids the “double taxation” inherent in other business organizations but is not a flexible as a limited liability company. Only US citizens and US resident aliens may own an S corporation. There is a limit of 75 shareholders. An LLC may offer different levels/classes of membership while an S corporation may only offer one class of stock. There is not a limit to the number of people who can own an LLC. An LLC can be owned by a US or foreign person, a corporation or another LLC. However S corporations cannot be owned by other corporations, most trusts, LLCs, partnerships, or nonresident aliens. Additionally, LLCs have no restrictions on subsidiaries. If you have general questions about the differences between an LLC and an S corporation, please feel free to contact the associates at Lawyers Limited.
How is an LLC taxed?
An LLC can be taxed for federal income tax purposes as a partnership. An LLC can choose partnership status in order to avoid taxation at the entity level. If an LLC is not taxed as a partnership it is often taxed as a C corporation (as chosen on the IRS 8832 form). Some owners of LLCs elect choose for their LLC to be a “disregarded entity” for taxation purposes where the owner is fully responsible to report the taxes on his or her personal tax returns.
What is the organizational structure of an LLC?
An LLC is owned by its members. The business organization may resemble either a partnership or a corporation depending on who exercises managerial responsibility. An LLC resembles a partnership if managers are not used. In this case the members have a direct say in the managing and day to day activities of the company. An LLC would resemble a corporation if its members choose to use managers to administer to the day to day activities of the company because the members will not typically participate in the day to day management.
