• June 2019
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Definition of a Limited Liability Company (LLC)

If you are interested in launching a startup or founding a new business, you may feel understandably overwhelmed by all the decisions you will need to make before your new company can commence operations. One of the most critical decisions you will need to weigh is how to formally structure your business, legally-speaking.

There are four primary legal structures that new business owners may ultimately choose to embrace. Each has its benefits and its potential drawbacks. One of the most popular business structures serves as the “middle ground” between sole proprietorships/partnerships and corporations. This structure is known as a limited liability company.

What a Limited Liability Company Is

There are two primary reasons why the LLC structure is so popular, regardless of a company’s size. First, it provides flexibility when it comes to taxation. Second, it provides members with a personal liability shield. Practically speaking, this means that if a business incurs losses, cannot meet its debts or becomes subject to legal judgments, an LLC’s members generally do not need to fear that their personal assets will be reachable by creditors or the courts.

In terms of taxation, LLC members may decide at the point of formation whether they prefer for the business to be taxed as a sole proprietorship/partnership or as a corporation. This flexibility is particularly attractive for aspiring business owners who wish to be taxed at the corporate level (as opposed to personally) but do not wish to subject their company to the strict management style that is the predominant feature of corporate structure.

Finally, it is worth noting that the LLC structure is available to businesses of all types. From solitary owners to massive companies, it is generally possible for a business to be formed as an LLC regardless of size or industry type.

What a Limited Liability Company Is Not

Unlike sole proprietorships and partnerships, LLCs do not feature a management style that is essentially completely flexible. LLC members are subject to more restrictions than sole proprietors and partners who form a legal partnership. Similarly, there is generally more paperwork and reporting associated with forming an LLC.

In addition, LLCs are not beholden to shareholders in the ways that corporations are. The members of an LLC are not held accountable by a board of directors and there is no stock issued by limited liability companies. Although the management style of LLCs is not as flexible as partnerships and sole proprietorships, it is far more flexible than corporate management structure is required to be by law.

LLC Formation Assistance Is Available

If you are interested in forming a limited liability company, please reach out to LawTrades today. Our team has extensive experience aiding aspiring business owners and startup founders throughout the processes of financing and formation, commencement of operations and on-going compliance. In addition, our intellectual property, recruitment, in-house counsel, short-term staffing and general legal strategy services help to ensure that businesses run as smoothly, efficiently and effectively as possible. As a bonus, our services are purposely affordable so that companies of all sizes and industry types may benefit from them. If you are thinking about forming an LLC, look no further than LawTrades for all of your business’s legal needs.