Limited Liability Company (LLC)
Definition of Limited Liability Company
According to definition a Limited Liability Company (LLC) is a corporate structure in which the shareholders of the company have limited liability to the company’s actions. A Limited Liability Company provides the shareholders the required personal liability protection for any action of the business. The compensation of the business is not recovered with the assets of the owners.
Features of Limited Liability Company
Limited Liability Company (LLC) provides the owners of the business protection against any losses that a business might face. The owners of the business are called members and by voting one of the owners is assigned as the managing member who would take care of the daily operations of the business and other business operations. The flexibility of the owners is pretty much like that of a partnership. The Limited Liability Company (LLC) is formed by filing articles of association in the state where the company is being formed.
Advantages of Limited Liability Company (LLC)
The following are the advantages of a Limited Liability Company:
- The Limited Liability Company can be formed with one member only, and the member can be a whole company.
- The owners are protected against company liabilities.
- The decision making for the company rests with the Managing member of the Limited Liability Company so there is no need for regular meeting of the board members.
- There is very little need for book keeping and other financial and administrative record keeping in a Limited Liability company.
Disadvantages of a Limited Liability Company
The following are the disadvantages of a Limited Liability Company:
- The earnings of the company are subjected to employment tax.
- The Limited Liability Company is like a partnership and cannot make profits out of the incentive stock.
- There are different rules for every state. So there are different rules for taxation in every state. Some have tax while most others do not.
A Limited Liability Company (LLC) offers the necessary protection against various law procedures to the owners of the company against any liabilities that are caused to the business.
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Most WantedFinancial Terms
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- Debt-to-Equity Ratio
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- Solvency Ratio
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- Receivable Turnover Ratio
- Return On Capital Employed (ROCE)
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