What is LLC?
LLC stands for limited liability company and it refers to an organization that combines both features of a standard corporation and small businesses like partnerships and sole proprietorships. For people who wish to put up a company that has the flexibility of corporations and some features of smaller businesses with limited liability, they can have their companies registered as a LLC. One basic feature of a LLC is that the founders are called as members rather than stakeholders. These members have limited liability in case something goes wrong with their company. In the case of huge debts from a particular LCC, all members are basically not liable in terms of their personal funds. Credit institutions for example cannot force each member to pay for the company’s debts but rather payments are coursed through all the members as a group.
Unlike a corporation, companies that are classified as LLC are not required to hold meetings and take minutes about them. No by-laws are also required for LLCs but most experts suggest having a common standard operations agreement between different members. There is also no limit in terms of membership for LLCs. The only concern is that when one member leaves the company, the whole LLC may be dissolved. In corporations for example, stakeholders have the option to transfer stock ownership of the company when a particular stakeholder wants to bail out or leave due to bankruptcy or other reasons. Another great advantage of putting up a LLC is in terms of taxation. Standard corporations have various tax requirements but LLCs have the flow-through taxation system similar to smaller businesses like partnerships. In this kind of taxation system, members of a particular LLC will only be taxed for their own earnings as individuals. No more taxation is imposed by simply being members of a limited liability company.