Generally business can be done on the own, or can be added with partners or can be of corporate level. An LLC stand for Limited Liability Company is becoming popular term used in the field of business. It is a new concept combines the elements of sole partnership, partnership and corporation. Any business can be formed or converted to LLC. However, type of business, personal assets and the liability of the risks are the most important factors in deciding whether to go to LLC or not. The business can be handled solely or it may have partners, doesn’t matter how many partners and it can be formed anywhere. To Form an LLC in New York one can easily apply to the respective state to get.
The members of LLC or simply referred as owners are not responsible for the personal debts and lawsuits. For example if an LLC is filed for any bankruptcy , the members need not pay the company’s debts with their personal money or even if a lawsuit is filed against the company, the members of LLC need not take risk in covering the settlement. For a company to become LLC, it has to apply to the state and should follow the regulations set by the state. For example to Form an LLC in New York the owner has to file the Articles of Organization with New York State with a nominal fee for filing. The company or the organization has to comply the rules and regulations as required by the state. And if the company found to fulfill the requirements of regulations, then the company is qualified to have all the privileges and protection afforded under the New York law. The documents and the fee are the not the same for the companies which are run on sole proprietorship or with partnership. Some states even collect an additional franchise tax.
Advantages of LLC
There are many advantages of a company to become LLC which are as follows:
- The one of the most advantage is the member of LLC have a limited liability protection. This means even if the company is sued the personal assets like bank deposits and property of the members are protected.
- LLC members can have tax flexibility. There are several options; it is the member’s to choose which include single member LLC, partnership in LLC, corporate LLC.
- Limited Liability Companies have the varied flexible options to split their profits and distributed among the members of the LLC. The members of LLC make an operating agreement, in which the profits and losses of the company are distributed to the members regardless of their individual contribution in the investment.
- There is no limit for the number of owners in LLC, it can have even up to hundreds, where in some legal structures limit the number of people under ownership.
- LLC also have the advantage to have freedom in management. Unlike corporations, LLCs does not require board of directors, annual meetings, formal minutes and records ie. The paper work is less in LLCs. It is easy to form and easy to maintain.