Is LLC – Limited Liability Company the Way to Go?

Many new entrepreneurs are looking at the options before them and are bewildered. Choosing a type of corporation or company to create to shield you from personal responsibility for your business dealings is the overwhelming impetus for finding out about various incorporation options in Georgia or whatever state you wish to incorporate in.

Virtually all states allow the following: LLC (Limited Liability Company); S-Corp – sometimes called subchapter S incorporation. This is a profit corporation with the “S” designation from the IRS (Internal Revenue Service); Profit or C-Corporation; Non Profit Corporations. Georgia allows all of these.

Both LLCs and corporations can be great choices for entrepreneurs that want to protect their personal assets from being seized in case of law suits against the business. Corporate entities and LLCs provide a layer of protection that most find well worth the effort.

In addition to the lessened liabilities there is another reason to form an LLC or corporation, and that is for funding. Loans are more likely to be made to LLCs and corporations than they are to sole proprietorships. Form an LLC to gain some credence for your business among lenders and other businesses.

Each business type is treated a little different by the IRS and has pluses and minuses associated with them.

Picking the one that is best for your situation depends on the needs of you the owner, the number of staff you will have, and other needs of the business you are involved in.

Corporations offer personal liability protection, tax savings, and increased opportunities for raising capital.

Administrative practices are part of corporations – like keeping detailed transcription or meeting minutes at the annual meetings.

LLCs intrinsically have the same personal liability protection as a corporation. The administrative requirements are less. LLCs are not usually required to hold meetings or produce detailed meeting minutes (goes by state). LLCs have tax advantages like flow-through or pass-through taxation. If they choose, an LLC can also be taxed as a regular corporation.

Here are a few points for each, so you can compare the various options:

C Corporation

* Personal liability protection for owners
* Profit can be distributed among owners and the corporation – effectively lowering the tax rate
* Requires formal meetings and meeting minutes (detailed notes)
* Annual state reports
* No restrictions on membership

S Corporation

* Liability protection personally for the owners
* Profit or loss flows to shareholders
* Need formal meetings and meeting minutes (detailed notes)
* Annual state reports
* Maximum of 100 shareholders

LLC – Limited Liability Company

* Liability protection personally for owners
* Profit or loss flows directly to members
* Choice of taxation as LLC or corporation
* Annual state reports

Many one-person businesses find LLC the way to go, and, in fact the LLC has caught up to or surpassed regular C-Corporation filings in many states. Consider the LLC as the right choice for your new Georgia business.

Georgia LLC: What is it?

A limited liability company ( LLC or L.L.C.) is a legal form of business company giving some limited liability to the LLC owners. This is a legal business entity in most U.S. States. An LLC is not correctly called a limited liability corporation, it’s always limited liability company.

A LLC is a fusion of  two types of business entities:

1. partnership
2. corporation.

The main function of a corporation is the lower liability to owners. There is some limited protection available for actions and debts of the company. Having a corporate entity separate from one’s own personal assets can, in some cases buffer the losses the individual will experience or ameliorate them altogether.

Partnerships offer a pass through of income taxation.

A LLC is seen as being more adaptable or flexible than a regular corporation or partnership and is appropriate for single owned smaller companies.

Some words to be familiar with regarding LLC’s:

• Operating Agreement (OA): This is the agreement that is of utmost importance to the success of the LLC entity because it regulates the rights of members and, if any exist, managers.
• Members: Members of LLCs are the owners of the limited liability company similar to compared with shareholders as the owners of a corporate entity or the partners in a partnership. Members might be persons, corps., partnerships or even other limited liability companies. A member has a certain limit of responsibility to pay back obligations to the LLC which is limited by the capital contribution defined previously.
  
• Managers: Limited Liability Companies might be member-managed in relation to their membership interest. Quite a few LLC OA’s allow for a manager or even a panel of managers to manage the affairs of the LLC. Managers are either appointed by members, win elections, and can also be removed by members. A member could also be a manager, “Managing Member”.
• Articles of Organization: Every Limited Liability Company must register witht he secretary of the state of Georgia. When the articles of organization are filed – these are sufficient.

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