Formation of Limited Liability Company
Ready to form a limited liability company (an “LLC”)? Considering filing an LLC? Are you not sure whether to form an LLC or a corporation? Are you considering the pros and cons of various corporate entities? Are you trying to figure out the issues surrounding your Operating Agreement? Are you looking for experienced legal advice at an affordable price and not just an online incorporation service? The business lawyers of Hale Ball have helped many, many business owners sort out the complexities of which entity is the RIGHT entity for your situation.
The business attorneys at Hale Ball will meet with you in person, will discuss the various options that are available to you, and will help you choose the right entity to begin your business endeavors. We will not only help you form your corporate entity but will also guide you through the maze of standard issues each business faces in order to begin operations in a lawful manner. We will review with you the 25 critical steps you need to take to assure the lawful operation of your business.
Please read below if you are looking for basic information on limited liability companies.
Limited Liability Company Structure.
A limited liability company’s internal structure is extremely flexible. A limited liability company always has members and can have managers and officers.
Members are the owners of the limited liability company. In a “member-managed” limited liability company, the members play the combined role of the shareholders, directors, and officers of a corporation. They make all the major decisions and handle all the day to day operations of the company.
Managers. For limited liability companies that have managers, the managers play the same roles as the directors and officers of a corporation. Limited liability companies that have managers are called “manager-managed”. The managers are elected by the members. The managers will make all the major decisions, and handle the day to day operations.
Officers. Limited liability companies can also have officers. The members and managers can decide whether there will be officers and the roles of officers. Unlike corporations, there does not have to be a president, secretary or treasurer.
Corporate meetings. Unlike corporations, limited liability companies do not have to have annual meetings of the members. Generally, the operating agreement of the limited liability company will establish how meetings will be conducted. Meetings can be conducted, when required, in person or by conference call, or a combination of both.
Corporate formalities. A limited liability company does not have to file annual reports. Rather, it only has to pay the annual filing fee. It does not have to disclose the owners, members or directors publically, whereas a corporation has to file an annual report that discloses the officers and directors of the corporation.
Compensation. A limited liability company will generally make distributions to its owners. Unless it has elected to be an S corporation, it cannot pay the owners’ salaries but can pay “guaranteed draws” that are the functional equivalent of salaries.
Tax status. A limited liability company as several options for tax treatment (“check the box”).
- Disregarded entity. A limited liability company that has one owner can elect to be taxed as a disregarded entity. This means that the owner is treated as a “sole proprietor”. The owner will report the revenue and expenses on the owner’s personal tax return, usually, on a Schedule C. All profit is distributed, and the owners will pay estimated taxes four (4) times a year.
- Partnership. A limited liability company that has two or more owners can elect o to be taxed as a partnership. All profits and losses are allocated to the owners based upon their respective owners. All profit is distributed, and the owners will pay estimated taxes four (4) times a year.
- C or S corporation. A limited liability company can elect to taxed as either a C corporation or an S corporation.
- You should consult with your accountant to determine what tax status is the best for your situation.
If you have a question about LLC formation, we encourage you to schedule a confidential consultation with one of our Northern Virginia lawyers. To make an appointment call us at the above telephone number 1-703-591-4900 or use the contact form below.
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