Business Law: Understanding Limited Liability Companies
Limited liability companies are rather new, as they weren’t really recognized by most state business law regulations until the 1980’s. Fortunately, this has changed. Limited liability companies, or LLC’s are now a very popular choice among those who are starting a new business. Taking the time to understand some basics of business law is imperative for any new business-owner-to-be. It would be impossible to cover everything in a single article, though. So here, we’re going to some basics of the LLC.
What Exactly is a Limited Liability Company?
Limited liability companies are one of the four options you have when organizing your business (the other three are corporation, sole proprietorship, and partnership). An LLC is appealing to many people looking to start a business, because under business law an LLC combines some of the best advantages that other types of businesses you can choose. An owner of an LLC enjoys the limited liability that was once normally only available to corporations. Under business law, this means that they are not as likely to be held personally liable for any debts or losses that the LLC incurs. This is nice; especially when you consider that an LLC is much easier to set up than a corporation. An LLC also is much more flexible than a corporation. However, some states won’t allow particular professions to form an LLC. You’ll have to check with your state’s business law to see if the LLC is an option for you.
Benefits of an Limited Liability Company
We’ve already explained how LLC owners are able to escape the majority of personal liability for a company’s debts, but what other benefits are there to forming an LLC?
No Tedious Minute Keeping: A corporation has to hold meetings and formal notes of minutes to verify everything that happens. There must also be a record of resolutions that are decided upon. An LLC does not have to adhere to these strict record/minutes recording.
Distribution of Profits is Flexible: In a regular partnership, profits have to be split 50/50. In an LLC, though, you are given much more flexibility as to how profits are going to be distributed.
Under Business Law, Are There Any Disadvantages?
One major drawback is the duration of an LLC: If a member dies or ends up in bankruptcy, an LLC dissolves. However, a corporation wouldn’t. There are advantages and disadvantages with any type of business that you decide to start. An LLC may be an excellent choice though, and very well may be the easiest to start. Take the time to look at business law specific to your state.