Limited Liability Company Form of Business Entity
The LLC Form of Business
The limited liability company form of business provides insulation to the owners of the
company from creditors just as incorporating does. Also, LLC formation is similar to forming a
corporation in that Articles are filed with a regulatory office of the state.
Much comparison is made between the limited liability company and corporation forms of
business, however, an LLC business entities' organization is more analogous to a partnership
than it is to a corporation.
The Limited Liability Company business structure provides management flexibility, asset
protection and a simplified taxed structure which make the LLC entity the fastest growing form
of doing business in the United States. Key aspects include limited personal liability of owners
from creditors, simplified management as opposed to a corporation and a tax structure which
avoids double taxation. Members of an LLC (owners) pay taxes on the income, yet have the
advantage of limited liability as the shareholders of a corporation do.
Composition and Management of Limited Liability Companies
Basically, limited liability companies are a combination of the partnership and corporate forms
of business. However, running an LLC is significantly easier than operating a corporation.
One or more members (owners) can generally manage the business without the burdensome
paperwork requirements that are found in operating a corporation. An LLC can consist of one
or more members who may actively manage the business of the company or designate other
persons to do so. Arizona and California both allow for single member LLCs.
Members can choose to distribute their profits and losses in any manner they wish, regardless of
the percentage of ownership of each members. For example, profits of the business could be
allocated to two owners on a fifty-fifty basis, even though one of the owners might only have
10% management rights over the company. With a corporation, this type of income dist