An LLC corporation is a type of business structure that resembles a corporation, but include some of the benefits of a partnership or sole proprietorship.
Due to the many advantages, forming an LLC corporation has become very popular in recent years. An LLC may have one owner, or several owners that are referred to as members. Limited personal liability is perhaps the most attractive benefit to this type of business formation. Similar to a corporation, members will not be held personally responsible for any debt that is acquired by the business.
Limited liability means that if the business acquires debt, such as the inability to pay a creditor for example, the creditor cannot come after the individual's assets. The creditor would only be permitted to bring suit against the business to return the money.
A member within an LLC corporation will only lose the amount of money that he or she has invested within the business, not personal funds. However, this will only apply if the owner of the LLC maintains the separation of the business. If it is discovered that the LLC corporation has become an extension of the owner's personal assets, then he or she could be held liable.
It is very important to create an operating agreement to ensure the legalities of the LLC. An operating agreement will detail the rights and responsibilities of each member within the LLC corporation. Oftentimes, members will invest different amounts, and this will determine the amount of profit or losses that they will be entitled. Although some jurisdictions do not require an operating agreement, it is very important to the company because it will help avoid controversy and confusion. LLC law is flexible in regards to management structure.
This is why it is important to include within the agreement how important issues will be decided. It is sometimes beneficial for some members to be responsible for the day to day operations of the company, while another member may be responsible only for the financial aspects of the business. These documents can be created using blank forms available on the Internet, or from the state secretary's office. However, many people will choose to hire a business law attorney to form this document to ensure its legality.
When forming an LLC, members should be aware of the specific rules and restrictions that are set by each individual jurisdiction. All states will require some kind of filing fee when the articles of formation are submitted. These documents will have to include the name of the LLC corporation, the address, and the names of the individual members.
Again, these forms may be filled out on one's own, or with the help of an attorney. In general, any type of company is eligible to form an LLC. However, state legislation will prohibit any LLCs to be formed on the basis that they are an insurance company or bank.