Limited Liability Company (LLC)
To start an LLC, Articles of Organization must be filed in the state(s) in which the business will operate and other tasks must be completed so that the company is following all applicable rules and regulations.
What is a LLC
The LLC structure combines the advantages of a corporation and those of a
Partnership or Sole Proprietorship. It can be a single-member LLC or a multiple-member LLC. Forming your business as an LLC limits member (owner) liability while requiring less paperwork and fewer formalities than a corporation.
Taxes are handled as they are for a Partnership (or Sole Proprietorship), with all income flowing through to members and reported on their personal tax returns. An LLC may instead elect to be taxed as a corporation by filing IRS Form 8832 (Entity Classification Election). The LLC structure also provides management flexibility. It can be member-managed, in
which owners handle the day-in-day-out management responsibilities. Or an LLC can designate a person (or persons) as a manager(s), which is called a manager-managed LLC. Most states will by default consider an LLC “member-managed” unless the formation paperwork specifies that it should be a “manager-managed” LLC. Learn more
about Member-Managed LLC vs Manager-Managed LLC options.
An LLC can benefit from an LLC Operating Agreement, particularly when manager-managed or when it has multiple members, to describe the authority and responsibilities assigned to the individuals involved in the business. Learn more
about Single Member LLC vs Multiple Member LLC options.
One disadvantage of the LLC is the inability to issue stock to raise capital. However, many LLCs are able to raise capital by issuing shares of membership, though this may be limited by the language in the LLC’s Operating Agreement.