This form is not a corporation, partnership, or trust, but offers a combination of features that make it a popular choice for many businesses. The chief advantage is that an LLC provides corporate-like liability protection for the owners – plus partnership-like flexibility in capital and management structure. Members of the LLC can be actively involved in the management of the business, but they are shielded from liabilities.

A disadvantage of the Limited liability Company is that it must have at least two members to elect partnership classification for federal income tax purposes. In addition, State law may limit the life of the Limited Liability Company, and the lack of uniformity in Limited Liability Company statutes from state to state are a grave disadvantage because businesses that operate in more than one state may not receive consistent treatment in another state.

Limited liability companies are relatively easy to organize and maintain. In most states, a limited liability company can conduct any business activity. Business owners use this type of organization because it can combine the liability protection of a corporation with the flexibility and tax advantages of a partnership.

Any person may form a limited liability company by signing and filing Articles of Organization with the Secretary of State’s office in their state. LLC’s are also required by state law to have an “operating agreement” (a plan stating how you will operate your business). Limited liability companies must be properly structured and maintained for their members to be taxed as if they were a partnership.

The American Dream by CK Quarterman