What is a LLC?
Limited Liability Companies (LLCs) have been featured prominently in the news for the last few years, and with good reason. Why is this? Whereas traditional companies have some short-comings for the business owner, LLCs offer a solution that is appropriate for many.
One way to define an LLC is as a merger of the partnership and the corporation, except it has the all of the beneficial qualities of each and few or none of the less favorable aspects. It offers full limited-liability protection to all the owners (like the corporation), yet has a pass-through tax status (like the partnership). In addition, the LLC has a second layer of liability protection that shields the business from any personal lawsuits that may befall you.
LLCs are relatively new entities. Subsequently, there are details about the LLC that need some further explanation for many. Even the seasoned business owner with a working knowledge of corporations and companies often require some assistance in deciding if an LLC is the right answer.
Probably the easiest method to understand the concept of a LLC is to consider it as a regular partnership, with the exception of the fact that all of the partners have limited-liability protection. With this safeguard, the partners (also known as “members”) of the LLC are not personally liable for debts incurred or actions taken by the corporation. Next, as LLCs have to be formed with the state, and this lends them an “official” consideration. Finally, LLCs allow for the company to raise capital by selling off pieces of the company in the form of membership interests. But when all is said and done, LLCs were made to be easy. They are easy to understand and easy to run. Not to mention, if you make a mistake, the consequences aren’t as dire as they would be with a corporation.
LLCs, like most entities, are subject to state oversight. The problem with this is that not all states treat LLCs in the same manner; Thus, you will need to do a little bit of research to make sure you’re complying with the laws of the states you are transacting business in. For more information or if you have any questions about LLCs in the State of Nevada, please feel free to contact us.
Although in most states, more LLCs are being formed now than corporations, they are still a very new entity. Compared to corporations, which have hundreds of years of case law backing them up, courts still have a lot to decide about LLCs. When operating an LLC, know that some things are based upon assumptions rather than actual legal precedents, and this creates gray areas — and potential problems. After all, you don’t want to be the unlucky guy stuck in the courtroom when everything you thought you knew about LLCs is overturned. The best way to avoid this is to have a great registered agent who stays abreast of LLC laws for you. Should any monumental shifts occur in how LLCs are treated, we can fill you in so you can plan accordingly.
