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Limited Liability Company: Recent Phenomenon for Small Business 

Is a Limited Liability Company right for me? 

Limited liability companies have been around since 1977, but recently have grown enormously in popularity.  A limited liability company brings together some of the best features of partnerships and corporations into somewhat of a hybrid type of business structure.  

Limited liability companies were created to provide the same type of liability protection that corporations enjoy, without the double taxation associated with regular ( C ) corporations.  Profits and losses are passed through to the owners and onto their personal income tax returns. 

Although limited liability companies have some similarity to S corporations, there are some significant differences. One important difference is that there is no limitation on shareholders with a limited liability company, unlike an S corporation, which has a limit of 75 shareholders.  As differentiated from a limited partnership, any member owner of a limit liability company is allowed a full participatory role in the operation of the business. 

In order to set up a limited liability company, you must file articles of organization with the Secretary of State in the state where you intend to do business. Some states also require you to file an operating agreement which is relatively similar to a partnership agreement.  Similar to partnerships, limited liability companies do not have a perpetual life such as with a C corporation.  While some state statutes stipulate that limited liability companies must dissolve after 30 to 40 years, technically they dissolve when a member dies, quits or retires. 

Limited liability companies that intend to operate in several states must be in compliance with statutes in all of the related states that they plan to do business.  You should always seek the advice of an accountant who has experience with limited liability companies when setting up this type of business structure, and who is familiar with all of the rules and regulations related to limited liability companies. 

Limited liability partnerships are another recent development.  With a limited liability partnership, the General partners have limited liability.  In this circumstance the partners would have liability for their own malpractice, and not that of the other partners.  This legal form works well for those involved in a professional practice such as physicians. 

Information from Start Your Own Business by Rieva Lesonsky.

Web page and Start Your Own Small Business Course by Paul Susic M.A. Licensed Psychologist Ph.D. Candidate CEO/President Susic Psychological Consulting P.C.