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Might as well post what they have to say about LLC as well.
Limited Liability Companies
Background
Every state has enacted laws permitting the formation of a limited liability company ("LLC") as an alternative to traditional corporations, general partnerships and limited partnerships. LLCs have become popular
because they offer the flexibility in management and other matters like a general partnership, while providing the benefit of limited liability for the investing members, like a corporation.
Unlike limited partnerships, LLC's protect all of the owners and all of them may participate in management. Unlike S corporations, LLC's do not restrict the number or type of owners. For these reasons, the LLC is
sometimes preferred to these other popular entities used by small businesses.
Basic Requirements
Limited liability companies are formed and established much like a corporation. The founders must prepare and file the proper documents with the state, according to the state's limited liability company law.
These laws normally provide that the LLC may have powers like a corporation. However some states restrict LLCs from certain activities, such as banking, insurance and professional services. LLC's have
members, similar to a corporation's shareholders. These members must have a written agreement, much like a partnership agreement.
Cost
Unfortunately, the average cost to establish an LLC is much higher than the cost of simple incorporation. LLC documents are not standardized, and it is important to have a qualified attorney help establish an
LLC. While the cost to set up a corporation can be as little as $100 plus filing fees, an LLC usually costs a minimum of $1500 plus filing fees, and is often much higher.
Considerations
The IRS has determined that an LLC meeting certain requirements may be taxed as a "pass through" entity like a partnership or S corporation. This means that the LLC's profits and losses flow through to the LLC
members. Many of the restrictions placed on S corporations, such as limits as to the number of shareholders, do not exist for an LLC.
LLCs also differ from regular corporations in other ways. LLC laws do not permit the LLC to have unlimited life. Most laws prohibit LLC's to a life not to exceed thirty years. Also, LLC members are subject to
different rules with respect to transferring their membership interests, and withdrawing and distributing profits, as compared to a regular corporation's shareholders. One of the drawbacks to LLC's is the
uncertainty of doing business outside the state when the LLC is formed. Because not all states have identical LLC laws, you may have difficulty qualifying your LLC in a "foreign" state. If not properly qualified, that
state law may permit claimants to "pierce the corporate veil", thereby making individual members liable for LLC debts. This loss of limited liability protection poses a substantial risk.
Consult with your attorney to determine if an LLC may be appropriate for a given business enterprise.
Limited Liability Companies
Background
Every state has enacted laws permitting the formation of a limited liability company ("LLC") as an alternative to traditional corporations, general partnerships and limited partnerships. LLCs have become popular
because they offer the flexibility in management and other matters like a general partnership, while providing the benefit of limited liability for the investing members, like a corporation.
Unlike limited partnerships, LLC's protect all of the owners and all of them may participate in management. Unlike S corporations, LLC's do not restrict the number or type of owners. For these reasons, the LLC is
sometimes preferred to these other popular entities used by small businesses.
Basic Requirements
Limited liability companies are formed and established much like a corporation. The founders must prepare and file the proper documents with the state, according to the state's limited liability company law.
These laws normally provide that the LLC may have powers like a corporation. However some states restrict LLCs from certain activities, such as banking, insurance and professional services. LLC's have
members, similar to a corporation's shareholders. These members must have a written agreement, much like a partnership agreement.
Cost
Unfortunately, the average cost to establish an LLC is much higher than the cost of simple incorporation. LLC documents are not standardized, and it is important to have a qualified attorney help establish an
LLC. While the cost to set up a corporation can be as little as $100 plus filing fees, an LLC usually costs a minimum of $1500 plus filing fees, and is often much higher.
Considerations
The IRS has determined that an LLC meeting certain requirements may be taxed as a "pass through" entity like a partnership or S corporation. This means that the LLC's profits and losses flow through to the LLC
members. Many of the restrictions placed on S corporations, such as limits as to the number of shareholders, do not exist for an LLC.
LLCs also differ from regular corporations in other ways. LLC laws do not permit the LLC to have unlimited life. Most laws prohibit LLC's to a life not to exceed thirty years. Also, LLC members are subject to
different rules with respect to transferring their membership interests, and withdrawing and distributing profits, as compared to a regular corporation's shareholders. One of the drawbacks to LLC's is the
uncertainty of doing business outside the state when the LLC is formed. Because not all states have identical LLC laws, you may have difficulty qualifying your LLC in a "foreign" state. If not properly qualified, that
state law may permit claimants to "pierce the corporate veil", thereby making individual members liable for LLC debts. This loss of limited liability protection poses a substantial risk.
Consult with your attorney to determine if an LLC may be appropriate for a given business enterprise.
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