Limited Liability Companies

Limited Liability Companies are statutory entities. Limited Liability Companies ("LLCs") are formed by filing articles of organization with the secretary of state. Most of the provisions regulating the internal affairs of the LLC are contained in the operating agreement, which is entered into by the members of the LLC. The operating agreement is similar in nature to the partnership agreement. LLCs offer limited liability to all members, and do not require the formalities of corporations. They also offer considerable flexibility with respect to control and management.

Single member LLCs are now permitted in all 50 states and the District of Columbia. LLCs can elect to be treated as either partnerships or C corporations for tax purposes, however, they are not limited by the same restrictions by which S corporations are limited. Unlike a limited partnership, the member does not lose his liability protection by participating in the management of the business. LLCs generally are more expensive to form than corporations, and generally have higher state franchise taxes or renewal fees. LLCs cannot be used if publicly held investors are desired, and investments may not be readily liquid.

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