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Why would I consider an LLC or limited liability company form of business organization?
A limited liability company (LLC) is a hybrid organization that has characteristics of both a corporation and a partnership. Its members (comparable to corporate shareholders) receive interests in the LLC in exchange for property, money, or services.
Like a corporation, it is a separate legal entity for purposes of limited liability of its members. It has the tax benefits, however, of a partnership. It also has the freedom from many of the legal formalities that govern corporations (e.g., annual reports, director meetings, shareholder requirements, etc.).
To create an LLC, members file articles of organization with the state and pay filing fees. Members should also have operating agreements, similar in concept to a partnership agreement, that explains the operation and management of the business.
There has been a lot of fanfare regarding this form of business enterprise and the law is still germinating. Each state has its own set of statutes governing LLCs—which must dovetail with IRS guidelines which are in constant evolution. For this reason, it is a necessity to have the advice of an attorney to determine how the LLC law in your state best applies to your situation.
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