What Is A Limited Liability Company?
People new to business and entrepreneurship regularly ask what
, exactly, is a limited liability company. And the "what is an LLC?" question is sort of predictable. Most of us know (sort of) what a regular corporation is. We've often worked for corporations or bought stuff from or sold items to corporations. But how is an LLC different? What's the big deal, so to speak?Well, you can better understand the practical answer to the "what is a limited liability company?" question by knowing three things about LLCs: when one uses them, how one creates them, and darn it why one even cares. But let me explain...
When the LLC alternative makes great sense?
As a practical matter, a limited liability company, or LLC, is a container you can use to hold a business or hold investments. In other words, while you can personally operate a business as a sole proprietorship or you and a few friends can collectively partner in a joint investment, you can also stick a business or investment "inside" an LLC.
With a limited liability incorporation, the LLC operates the business or owns the investment and the LLC owners (who happen to be called members) own an interest in the LLC.
How are limited liability companies created?
You trigger the creation of a limited liability company by filing articles of LLC formation with a state's Secretary of State. For example, to create an LLC in Ohio, you file articles of formation with the Ohio Secretary of State. And to create an LLC in Pennsylvania, you file articles of formation with the Pennsylvania Secretary of State.
Typically, by the way, you also pay a modest fee at the time of filing the formation documents, though sometimes the fee isn't modest. Some states really "ding" people who want to incorporate and charge absurd fees.
Note: For most states, the generalizations of the two preceding paragraphs are true. Some states add one or two other llc creation requirements, however. For example, some states require the llc to have an LLC operating agreement. And some states require the limited liability company to issue a public notice about the filing of LLC articles. (Normally, any "public notice" is done via a newspaper advertisement or two.)
Why form a limited liability company?
Two reasons exist for forming a limited liability company. First of all, a limited liability company limits risks. Specifically, the owner(s) of an active trade or business or of a passive investment stored within an LLC doesn't have liability for what goes on inside the LLC because of the ownership. Note that with a sole proprietorship and partnership, an owner does have liability because of his or her ownership.
A second reason also exists for forming a limited liability company: Rather uniquely, a limited liability company gives its owners noteworthy flexiblity in how the tax accounting gets handled. For example, an LLC can be taxed as a corporation or S corporation.
by: Stephen Nelson legitimate business online Your Book Is A Business Your Book Marketing Plan - Winning Strategies And Tips best way to deliver business classes online Daily Rfid Invite You To Join In Our Service how to start a online business building online business B2b Marketplaces A Powerful Lead Generation Tool! Benefit Auction Procurement Trend - Four Ideas For "farm-to-table" Donations making money online business opportunity Endless Leads For Your Prepaid Legal Business online business promotion how to create an online business