An LLC is a hybrid entity with the benefits of a corporation but the taxation of a partnership. It is has the same benefits of an S-Corp but with fewer restrictions for formation.

 

Key Highlights

• Structure of a corporation with the pass through advantages of a partnership.

• Limited liability for stockholder.

• Has perpetual life.

• Has the choice of being taxed as a Corporation or as a Partnership.

 

Formation

• Legal documents must be filed with the state.

• Same requirements and incorporating process as C-Corp.

 

Operations

• Shareholders are considered the “owners.”

• The shareholders elect a board of directors that oversee the company.

• The board of directors hire the officers (CEO, CFO, CMO etc.).

• The officers run the day-to-day operations of the corporation.

• In small corporations you can have an individual who is a shareholder, member of the board, and a corporate officer. This is common for LLCs where the owners also manage the business

 

Termination

• Directors vote to dissolve the corporation.

• Involuntarily dissolved judicially (Bankruptcy, cases of fraud, etc.).

• Failure to pay annual fees or file annual reports.