Corporate and Business Law > FAQ about Limited Liability Companies

What is a Limited Liability Company?

A Limited Liability Company, or "LLC", is an unincorporated business entity that is similar to both corporations and partnerships. Like a corporation, an LLC shields its members from personal liability for the debts and obligations of the company. Like a partnership, an LLC is typically formed by the filing of a "certificate of formation" or similar certificate with the Secretary of State and the members of LLCs typically enter into an operating agreement that establishes how the LLC is governed. LLCs may have an unlimited number of owners and there are no restrictions on the type of persons who may be owners. As compared to a Corporation, an LLC has more flexibility in management as LLC may be managed solely by its members or a management committee or officers. LLC's do not have the ownership restrictions of S Corporations, making them ideal business structures for foreign investors. LLC's are available in all 50 states and Washington, D.C. An LLC may provide for allocations of profits, losses, and distributions disproportionate to the percentage of equity interest held in the LLC. Because an LLC combines the insulation from personal ability of a corporation with the tax advantages and managerial flexibility of a partnership, it may be the entity of choice for new businesses. LLCs have a limited life of about 30 years and do not have stock.

What are the advantages of an LLC?

Limited Liability: Members of an LLC have liability that is limited to the amount of capital which the member has invested in the LLC.
Pass-Through Taxation: The earnings of an LLC are only taxed once.
Flexible Management Structure and Flexible Ownership: LLC's may be managed solely by its members or a management committee or officers

What is a registered agent?

A registered agent is a person designated to receive legal notices and other official documents delivered to the corporation. All corporations must have a registered agent having a physical address. The registered agent will forward these documents to the corporation at its principal office address.