Georgia LLC: Disadvantages

While there are plenty of advantages to choosing to structure your business as a LLC (Limited Liability Company) there are also some disadvantages that may or may not affect you. We strongly suggest reading through all of the advantages and disadvantages here before coming to a decision about whether or not the LLC entity is the right choice for your Georgia business.

LLC Disadvantages

• Most states don’t mandate LLC’s to have an operating agreement (OA) but, if you’re operating without one you may run into problems because most states assume you have one.
• LLC’s have many different titles which may cause confusion among the general public, or perhaps even within the LLC it’s self as one tries to determine who has the authority to enter contracts on the LLC’s behalf.
• Some states levy a franchise or margin tax on LLC’s for the priviledge of enjoying limited liability status. This fee may be assessed based on revenue, profits, amount of capital, or based on the number of owners in the LLC, or possibly even a flat fee.
• Though the LLC is supposed to protect memebers from incurring personal debt in the case of LLC legal problems, some lenders will rquire members of newly formed LLC’s to guarantee personally the loans – making members personally liable for loans that are defaulted on.
• Unfamiliarity. LLC’s are not required to have a board of directors or officers if they don’t wish. Traditional corporations do.
• Inside the USA – an LLC is treated as an LLC. Outside the USA and LLC is probably going to be treated as a US corporation, regardless of LLC designation.
• Some states do not fully recognize LLC’s and may treat the owner as a sole proprietorship or partnership in the case of more owners. This defeats the purpose of establishing an LLC.
• Investors traditionally fund corporations without the LLC designation. If you choose to call your business a LLC you may run into problems trying to raise investments in your business. Most investors like to invest in a company that will have an Initial Public Offering – which would reap them more on their investment. One way to overcome this is to create a new corporation into which the LLC merges. An IPO can now be a possibility.

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