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Hello and welcome to our website about the Limited Liability Company, known more commonly as the "LLC" and sometimes referred to as a limited liability corporation.   If you are interested in educating yourself about the LLC, you have come to the right place.  Visit our Learning Center to access a wealth of LLC Information 

Over 1 million limited liability companies (LLCs) are formed each year and the number is growing rapidly each year.  Why?  Because, the lawsuit epidemic in the United States is out of control and the LLC provides both business flexibility and proven liability protection.  Did you know that:

• Over 19,000 lawsuits are filed each day and small businesses are major targets?

• Your chances of being sued are higher than your chances of being hospitalized and this rises even more dramatically if you start a new business?

• There are thousands of aggressive contingency fee attorneys that actively prey on sole proprietor businesses or improperly maintained LLCs and corporations for big money lawsuits?

So, smart business owners know that they must best protect themselves from business liability by forming an LLC.  A properly formed limited liability company does just that.  It creates a legally enforceable layer of protection between you personally and your business.  Don't think that no one will sue you or find something to sue you for. 

The limited liability company is the holy grail of legal entities because it was specifically created to offer all of the advantages of other entity choices but without the disadvantages of those same entities.

But, a limited liability corporation must be properly formed and maintained in order to preserve that protection and get all of the LLC advantages.  More than half of the LLCs existing in the US are at risk because their owners have not properly educated themselves or received the right advice.

This website was created to give you and other business owners reliable, practicable and easy to understand information about the LLC.  Most people get overwhelmed and confused when they try to learn about the LLC.  The best way to learn about the limited liability company is to focus on one aspect at a time. 

If there is one thing you should take away after visiting our website, it is that you need to protect yourself and make the investment of time and resources to learn what you should be doing to ensure that your LLC is properly formed and maintained. 

The limited liability company really is a wonderful and flexible vehicle for operating most small businesses.  And the LLC laws get even better for business owners every year! So, the limited liability corporation is here and it is here to stay!

We truly hope you find this website helpful and that it answers the many questions you might have about LLCs.  We do add topics on a regular basis.  If you have a topic of interest or general LLC questions that are not addressed on the site, please send us an email and let us know (info@thellcxpert.com).

What is a Limited Liability Company | Limited Liability Corporation (LLC)?

An LLC (the popular acronym for a "limited liability company") is a separate legal entity created under state law.  An LLC only exists because LLC laws were passed in each state providing for a process to create and recognize an LLC.  In other words, it is a fictitious entity like a corporation. The only way you can prove its existence is with legal papers. 

Those same laws give the LLC permission to engage in acts just like a natural person.  An limited liability corporation itself can transact business, enter into contracts, have a bank account, hire employees and do anything that a natural person can do when it comes to running a business. 

The LLC has become the entity of choice for most small business owners.  From 2001 through 2004, the number of limited liability company formations increased by over 90% compared to only a 4% increase for corporation formations.  Why have so many business owners decided to set up an LLC?

What are the Benefits of an LLC?

The limited liability company was specifically created to provide the benefits of the other entity choices (corporations, partnerships) but without the disadvantages of those same entities. So, in effect. this best of breed entity gives you, as a business owner, the best of both worlds when it comes to limiting liability, providing flexibility to run your business the way you want and the choice of how you want your business to be taxed!

• Limited Liability Protection- The biggest benefit when you set up an LLC  is that you, as an owner of the business, will be shielded from being personally liable for the debts, obligations and lawsuits of the business unless you specifically agree to be liable or you engage in unlawful conduct.  In today's lawsuit crazed world, you will be completely at risk and vulnerable without the use of a separate legal entity.  The LLC is referred to often as a limited liability corporation because it offers the same protection as a corporation.

• No Restrictions on Type or # of Owners - An limited liability company can have only one owner (called a Member) or it can have thousands.  There is no limitation on the number of Members.  Plus, anyone can be a Member. In addition to US persons, foreign persons may own a limited liability company and any other kind of entity can own an LLC (a corporation, trust, partnership or another LLC).  While these benefits apply to C corporations, if a corporation wants to be taxed as an S corporation, there are substantial limitations on the type of owners and the number of owners.

• Tax Choices - The Members of a limited liability company can choose how the LLC business will be taxed.  The decision of how you want your business to be taxed is one that requires some thought and analysis.  The important thing to know is that the limited liability corporation gives you the ability to choose based on what is best for your business.  Also, unlike an S corporation, the LLC does not have to qualify for pass through tax treatment by meeting certain requirements.

• Lesser Formalities-  The LLC laws do not require that the entity comply with as many formalities as corporations.  A formality is a legal requirement and includes things like shareholder meetings and written approvals.   From a practical perspective, a formality means more issues you need to worry about and more time you need to spend away from your business.  In order to properly maintain your limited liability company and ensure you preserve your limited liability protection, you should engage in some formalities but there as not as many formality requirements as compared to corporations.

• Business Flexibility - The LLC gives Members the flexibility to operate their business in any way they see fit.  Your LLC business can operate like a general partnership, a limited partnership or a corporation.  Your LLC will have an LLC Operating Agreement and this agreement establishes a governing and operational structure for the LLC business.  The Operating Agreement can be amended as needed in the event the LLC business changes or requires a change in its set of operational rules.  

SO, WHAT'S THE CATCH- WHY WOULDN'T I USE A LIMITED LIABILITY CORPORATION?

There are some situations where you may choose to operate your business through a corporation as opposed to an LLC.  For example, if you plan on building a business that is going to sell its ownership interests to the public  (publicly traded), you will want to use a corporation.  Also, if you are going to raise capital in the equity markets and bring in professional investors (venture capital companies or angel investors), many of those investors will insist that you use a corporation.

The decision of what legal entity to use for your business is really dependent on your particular circumstances.  We cannot make that decision for you but do offer a helpful article on LLC or Corporation in our Learning Center.

If you do choose to use a limited liability company, we can help and provide you with quality information and services for forming your limited liability company and maintaining it. 

Unfortunately, most small business owners mistakenly think that all they need to do is file a document and then they are automatically protected from business liabilities.  This could not be further from the truth.

 

An LLC Must Earn the Benefit of Limited Liability Protection

Proper and complete formation is only the first step.  In order to preserve the limited liability protection, a limited liability company must do certain things and the business and its owners must act in certain ways.  If not, you will risk all of the benefits and protections that your LLC is supposed to provide you.

Three Important Stages for a Limited Liability Company

There are three stages to properly forming and maintaining limited liability companies.  As a new business, you should make the investment of time and resources to understand what you need to in each step.  These steps are crucial to proper protections.  Don't risk your liability protection.

• Stage 1 Formation- A limited liability corporation is a creature of state law and so can only be formed by a state agency.  There is a government agency in each state that is responsible for LLC formations.  Each state has its own laws and set of rules of what is required to form one.  It is important that your LLC is properly formed. Defects in formation can cause liability later.  If you would like more information on limited liability company formation, check out our LLC formation page LLC Formation.

• Stage 2 LLC Members and Operating Structure- A newly formed limited liability company has no owners (Members) and no persons appointed to run and manage the business.  It does not matter that you paid the money to create it, you are not automatically an owner.  Every LLC should have an LLC Operating Agreement.  Aside from the document creating your limited liability corporation, your LLC Operating Agreement is the most important document.  The Operating Agreement provides the evidence of who the Members are and how much each of them owns.  The Operating Agreement also establishes a management structure for your limited liability corporation.  If you would like to learn more about LLC Operating Agreements, click here:  LLC Operating Agreements 

• Stage 3- LLC Governance-  After you have done what is necessary to form an LLC business and the initial membership and management structure has been put in place, you and those operating the business must treat your limited liability company in a certain way.  You need to honor the LLC as its own separate entity and complete a few formalities year in and year out.  If you do not know what these governance requirements are, you should learn them and create a simple and automatic system for making sure that you comply with them.  If you would like to learn more about LLC Governance, click here:  LLC Governance