A limited liability company operates as a separate business entity. This means that its owners only stand to lose the capital they invested in the business and nothing else. In the event of a company bankruptcy or financial difficulty, the personal assets of the owners or shareholders cannot be used to settle any outstanding debts. The exception to this rule only arises when the owners of the limited liability company have signed a guarantee. A limited liability business structure is best suited for smaller companies which have only a few owners. It is also worth mentioning that the laws governing the forming and running of limited liability companies will tend to vary from state to state. Therefore, if you are considering establishing a limited liability company, you should make sure you obtain adequate legal guidance and advice from a good lawyer.
When forming a limited liability company, you are required to submit certain documents and pay a registration fee to the Secretary of State. The documents you will have to submit are termed Articles of Organization. You can either draw up these documents by yourself or you could have your lawyer do it for you. In terms of filing taxes, limited liability companies are allowed some flexibility under the law. They could either file company taxes as a corporation or as a partnership. In any case, the legal procedures involved in setting up limited liability companies are a lot more straight-forward than for a corporate business structure.
