Limited Liability Companies (LLCs) offer several advantages over corporations and partnerships. They can be registered in a very short time. The process is simple and the costs involved are not high. Basically, the Articles of Organization (in some states called the Certificate of Organization or Certificate of Formation) and the Operating Agreement govern the operations of an LLC. They offer great flexibility in conducting business. Any or all of the members may be directly involved in the operation of an LLC. Alternatively, that job can be left to a member or a group of them, or to a manager or managers.
Members’ liability is limited to the extent of their investment in the LLC, except where a member offers a personal guarantee. In this sense, an LLC is similar to a corporation. It has an advantage over a corporation when it comes to taxes. There is no double taxation because the procedure for collecting taxes is like that of a partnership or S corporation. The amount obtained from the sale of assets of an LLC is generally not subject to tax; with C corporations it is.
There are no limitations on the number of members. Some states even allow single member LLCs. The transfer of ownership may be made in accordance with the provisions contained in the Articles of Organization or Operating Agreement. Depending on applicable state law, the life of the organization may be perpetual or for a stated period. An LLC also offers its members’ assets strong protection against claims and lawsuits.
Many changes can be made to the structure and operation of an LLC, with the consent of the members. This may not require the submission of additional documents. Members can decide on the pattern of profit sharing and voting rights in any way they choose. Unlike a corporation, there is no obligation to keep minutes of meetings. But keeping such records can prevent potential misunderstandings and confusion.