An LLC contains elements of a general partnership and a corporation. According to the Internal Revenue Service, the popularity of LLCs (limited liability companies) occurs because owners enjoy limited personal liability for the debts and obligations of the business.
Significance
According to Companiesinc.com, courts view LLCs as separate legal entities. In other words, personal assets of owners remain separate from the assets of the business.
Ownership
Owners of an LLC are referred to as members. According to the IRS, members of an LLC may include individuals, other LLCs, foreign entities and corporations. LLCs may consist of a single owner or an unlimited number of members.
Articles of Organization
LLC creation occurs with the filing of articles of organization with the secretary of state's office. Articles of organization state information such as the name and location of the LLC. Costs to file articles of organization vary depending on the state of formation.
Operating Agreement
As indicated on Lectlaw.com, an operating agreement governs an LLC. An operating agreement establishes roles of members, ownership interests and the manner in which the company will function.
Taxes
When it comes to taxation, the IRS lacks a classification for LLCs. The IRS states that LLCs must file taxes as a partnership, corporation or a sole proprietor. Many LLC owners elect to pass their share of business profits and losses to their individual or joint tax return.
References
- IRS.gov: Limited Liability Company
- The 'Lectric Law Library: Limited Liability Companies
- Companiesinc.com: Limited Liability Company
- CT Corporation. "The Limited Liability Company Handbook." Page 1 and 29. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 17. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 12. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 25. Accessed Feb. 16, 2020.
- Internal Revenue Service. "Limited Liability Company (LLC)." Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 22. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 43. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Pages 19-21. Accessed Feb. 16, 2020.
- Internal Revenue Service. "Apply for an Employer Identification Number (EIN) Online." Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Page 15. Accessed Feb. 16, 2020.
- CT Corporation. "The Limited Liability Company Handbook." Pages 6 and 29. Accessed Feb. 16, 2020.
- Internal Revenue Service. "LLC Filing as a Corporation or Partnership." Accessed Feb. 16, 2020.
Writer Bio
Christopher Carter loves writing business, health and sports articles. He enjoys finding ways to communicate important information in a meaningful way to others. Carter earned his Bachelor of Science in accounting from Eastern Illinois University.