A limited liability company (LLC) is a company formation model available to the people of the United states among other states. This model of company registration is relatively new to the US as compared to other nations. The first state to legislated laws that permitted the company registration of a limited liability was Wyoming only in 1977. Since then, more and more states took up the business pattern as an option for company registration and by 1997, only 20 years after its introduction into the US, all the 50 states had adopted this business model type. The main reason for the adoption of this business model is the advantages that it gives to the shareholders and the flexibility it has towards company formation.
Characteristics of a Limited Liability Company
A limited liability company reaps from the advantages of both a corporation and a partnership. The company limits the liability that can accrue to the shareholders to the capital contributions. This therefore reduces the risk exposed to the shareholders. This is an advantage that it draws from the corporation type of business. However, on the other hand, the business model has its taxes applying to the shareholders (members) directly as opposed to the corporation itself. In other words, the company works its profits and losses, shares the losses or profits to the various members and then tax is levied to the members directly. The LLC is not a classification for taxation and therefore, the members file a form 8832 and choose the tax option for taxation, either as a partnership, sole proprietorship or associate taxable. This is an advantage similar to that of partnerships. The advantage of this model of business is that there is no double taxation. In a corporation, the company is first taxed directly and then the shareholders are taxed again on their share of the profits. Therefore, this company registration model enables the members to gain from the core advantages of both corporations and partnerships. LegalZoom LLC service review
Company formation for a limited liability company can either be other LLCs, partnerships, corporations, single persons or foreign entities. However, some states have various limitations to single person companies and you may need to seek further advise on the LLC company registration for single persons.
Limitations of LLC Companies
Not all business models permit for the company registration of an LLC. The business models is especially ideal for small to mid size companies. Financial institutions such as banks and insurance companies are not permitted to run their business as limited liability companies. They will need to form a corporation to operate. Non profit making companies will also not qualify for company registration under the same business model type. The charity organization must always run autonomous of the directors or members and therefore, this model will not work. There are other state limitations to the company formation of an LLC and you will need to confirm the qualification of your type of business model in your state.
Process of Formation
To register an LLC, you will nee to fill out the relevant application forms from office designated by the state. You will need to attach the Articles of Organization to the application which includes membership structure, capital contribution, type of business a