It is a formation of members (unlike partners or shareholders). These members (which can be unlimited) can include other corporations or individuals. A Limited Liability Company also combines many aspects you will find in a partnership or corporation.

The primary advantage of a Limited Liability Company is the protection.

As with a Limited Company the members will not be liable for any debts the company may incur , unless an individual personal guarantee has been signed.

Setting up a Limited Liability Company will be more simpler than for a corporation.

Unlike Corporations or Limited Companies, there is no requirement to keep company minutes, note resolutions or hold meetings, this in itself can reduce the workload on the business.

You have the flexibility to choose how profits are shared, unlike a conventional partnership or company where profits are given equally or in ratio to the number of shares held.

There is a tax advantage if circumstances allow where you will not have to pay both individual and corporation tax.

Drawbacks of a Limited Liability Company.

If a member becomes bankrupt or dies the company is dissolved.

Setting up will be more complex than for a sole-trader or partnership.

Although paperwork and general running is not as complex as for a corporation, never the less there is more work evolved than operating as a sole-trader or partnership.

Setting up a Limited Liability Company

It is recommended to use the assistance of an attorney as you will be required to file an Article of Organization to the Secretary of State. There will also be a fee for doing this. It is also advisable to complete an operating agreement to define ownership, profit sharing and responsibilities of the members.

It’s important to mention here that the rules and laws governing the formation of a Limited Liability Company will vary from state to state, both in the businesses allowed to do so and whether or not a public notification about the forming of your company in a local newspaper will be required. Always check with your attorney and local tax department.