Formation and Structure of an LLC
Articles of organization establish a limited liability company (LLC). To form an LLC, file articles of organization with the state. The articles of organization inform the state about the LLC and include:
- Company name and purpose
- Registered agent
- Names and addresses of members
An operating agreement outlines internal LLC operations and covers:
- Ownership percentages
- Member rights and responsibilities
- Dissolution procedures
Articles of organization create a separate legal entity from its owners, offering liability protection and tax advantages that a corporation does not.
Differences Between LLC and Other Entities
While there are similarities, key differences between an LLC and a corporation include formation requirements, structure, taxation, and owner liability.
Articles of Organization vs. Articles of Association
The Articles of Association provide provisions for a company’s inner workings such as:
- Manner of making calls
- Directors/employees qualifications
- Powers and duties of auditors
- Forfeiture of shares
- Dividend policy
The memorandum of association (MoA) contains details required for the formation of the company, establishing its objectives, powers, and scope beyond which the company cannot operate, limiting the scope of the company’s activities.
If there is any conflict, the MoA of the company prevails over the Articles of Association.
The Distinction Between LLC and LLP
The basic difference between LLC and LLP is that an LLC is a combination of conventional companies and partnerships, allowing for multiple owners ranging from private individuals to other entities.
Liability and Legal Protections
Limited liability is a legal structure that limits economic loss to the assets invested in the organization, protecting personal assets of investors and owners.
A multi-member LLC provides liability protection to its owners, distinguishing it from a partnership where owners are not separate legal entities from their business.