Thread: How does an LLC work?

Can someone explain to me how an LLC works and the positives and negatives. I tried using the search function and its doing me no good.

This sums it up pretty well:

Advantages:
# More flexibility: Although a limited liability company must file articles of organization with the state, it has a more flexible management structure than a corporation. The flexibility evolves from the phrase “unless otherwise provided for in the operating agreement.” This allows business owners to create a structure tailored to the business owner’s requirements.
# Limited liability: As its title suggests, the LLC protects owners and shareholders from personal liability in case of judgments or debts against the business.
# Tax options: An LLC can choose whether it wants to be taxed as a sole proprietorship, partnership, S corporation, or corporation.
# Fewer compliance issues: In most states, an LLC doesn’t need to have an annual meeting, and the LLC isn’t required to have a board of directors. Plus, there’s less paperwork and recordkeeping required compared to a corporation.
# Perpetual existence: Like a corporation, an LLC has a life of its own and can continue to exist after the owners sell their shares or die.
# Investors: Much like a limited partnership, members of an LLC can be investors only and have little or no say in the daily operation decisions of the business, as long as this is stated in the operating agreement.

Disadvantages:

* Pass-through taxes: Although LLCs do not deal with the “double taxation” faced by a corporation, they do incur “pass-through” taxation, meaning that profits and losses are reported on each owner’s or shareholder’s individual tax return, whether or not the shareholders receive dividends. Because of that, the LLC may be more suited to a one-person owner situation, as shareholders may not appreciate pass-through taxation.
* Raising money: Because of the lack of a strict corporate structure and the pass-through taxation, investors may be hesitant about putting their money into an LLC.
* Additional taxes: Many states, such as California, New York, and Texas, to name a few, require LLCs to pay a franchise tax or “capital values tax.”
* Less structure: The lack of strict requirements for governing the business could mean problems down the road unless a detailed operating agreement is in place, which requires additional upfront costs such as attorney fees.


Source: Pros and Cons of a Limited Liability Company (LLC) | Company Activities & Management > Company Strategy from AllBusiness.com


Source: Pros and Cons of a Limited Liability Company (LLC) | Company Activities & Management > Company Strategy from AllBusiness.com

depends on what your using it for... generally they are used for smaller companies with only a few employees/ execs, and it separates personal assets and business matters....

not necessarily....Chrysler is actually an LLC

An LLC is like creating another person and that person owns property or assets. Hope that makes sense.

Ok, I have a question about LLc's as well. I have a subcontracting business and get paid a 1099 by a company I do business with. im opening another business doing something different but auto related as well. would it make since to have a Main company as an LLC with these two under it? would I want to make these DBA's and the LLC more of a managemnt type company controlling the two?

I really think some of you guys need professional assistance with your business matters. Getting answers on a forum probably isn't adequate to some of these complex scenarios.

I've tried answering a few members' questions privately. It's worth it to have an accountant/lawyer to make sure they can assist with your individual situations.

i agree. i have an appointment with both this week. just thougnt Id throw it out there for conversation.

can a clothing line be a LLC

^sure. Any business can be an LLC, so long as they are conducting a legal business.

Generally speaking, most small businesses chose an LLC or Corporation with S election as their business entity. Both of these provide for limited liability, which is the main reason for choosing these options over others (I.e. Sole proprierorship, general partnership, etc.). LL basically means that if your business is sued, the complaining party can only get to your business assets, while your personal stuff stays protected. The other attribute these two share is pass through taxation. Income is taxed at the individual level only (not at business level and again at individual, as a C Corp).

Major difference in LLC and S Corp is that the latter has much more stringent rules you must follow. S Corp requires shareholder meetings, board of director meetings, etc. Failing to abide by these rules risks the chance that your entity is not recognized as a valid Corp by a court when you are sued (letting people reach your personal property). LLC has doesn't require these sort of meetings and the chance of something like this happening is not as strong.

If you have multiple businesses, such as Zam, then more times than not these need to be completely separate (i.e. two separate LLC for two businesses), both in management and finances. Never ever commingle money between one company and another or you risk liability issues.

reallllllly crude breakdown, don't rely on the accuracy of this. As other mentioned, it is always the best plan to consult with your attorney and cpa to ensure you are picking the entity that meets your needs.