Introduction to LLCs
An LLC protects owners like partners but taxes like corporations. It allows flexible ownership and management. Most new owners choose LLCs to benefit from disregarded entity tax status rather than corporations. LLCs allow flexibility in management structure. The main LLC advantage is limited liability protection for personal assets from debts and lawsuits. If judgments exceed business assets, members’ personal assets can’t cover shortfalls. Most single member LLCs are disregarded entities, taxed like sole proprietorships. No separate tax return is filed. Income and expenses are reported on the member’s individual return. This avoids double taxation of C Corporations and simplifies filing. Owners, called members, share profits and losses. An LLC can have one or multiple members. LLCs shield personal assets from legal judgments against the business. If sued, personal assets are protected.
LLC Management Structure
The operating agreement outlines everything. Owners of an LLC are referred to as members and might number one or more. When members of an LLC hire an entity outside of their company to manage their business for them, that is referred to as a “manager managed” limited liability company. LLCs can choose any officer titles they want. Common positions held by LLC Members in an LLC are President, Secretary, and Treasurer.
Role of a Director in an LLC
What is the role of a director in a limited liability company?