You are here: Information Center >> Small Business >> Selecting a Legal Structure for Your Business >> Limited Liability CompanyLimited Liability CompanyThe Limited Liability Company is another hybrid form of organization, blending features of a corporation and a partnership. It has the limited liability advantage of a corporation and the tax advantage of a partnership. Although LLCs are a fairly recent form of business, they are now recognized by all states and the District of Columbia. Owners of the LLC are called "members." If there is no written operating agreement, each member is considered to be a "manager." An operating agreement can identify specific members to be managers. Forming a Limited Liability Company As with a corporation, there are a series of steps to form an LLC:
What other forms do I need to operate an LLC?Each year, you will need to file an annual report with your secretary of state. Tax Aspects of a Limited Liability CorporationIf an LLC is structured properly, it is taxed in the same way as a partnership or S corporation. That is, each member/owner is allocated a share of the profit or loss, which is included on his or her state and federal tax returns. For tax purposes, LLC members are generally considered to be self-employed. That means they are responsible for their own estimated income taxes and related taxes. It is important to make sure that an LLC is structured properly, or it can be taxed like a C corporation. Liability for LLC MembersBeyond a member's investment in the business, he or she is not personally at risk for debts or other liabilities of the business. A member's personal assets are not considered to be liable for the actions of the business, unless the member guarantees a debt of the business or acts in a way that opens opportunity for liability. Dissolving or Closing an LLCThe LLC is considered to be perpetual unless certain events take place. The LLC would be dissolved if a time is specified or a triggering event takes place as specified in the articles of organization. Other events that would trigger dissolution are:
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