Limited liability companies offer investors and business owners a new alternative for doing business. Although limited liability companies have existed in some states for more than ten years, they did not become popular until the Internal Revenue Service began to tax them as partnerships rather than as corporations. Limited liability companies provide the limited liability of corporations without many of the corporate formalities.

Potential users of limited liability companies include

· Start-up businesses · Estate planners

· Venture capital organizations · Joint ventures

·                          Real estate ventures · Subsidiary companies

You should consider forming a limited liability company whenever you start a new venture or restructure an existing business. The benefits of limited liability companies include their favorable tax treatment, limited liability, flexible management, and relaxed formality. The legal work is relatively inexpensive and will help you to avoid problems and pitfalls that await those who are not advised by legal counsel.

In most states, a limited liability company is formed by filing a simple form of articles of organization with the secretary of state. The articles must include such information as the name of the company and its organizers, the address of the company's office, and the date on which the company is to be dissolved. The articles may also contain provisions appointing individuals to manage the company, creating obligations for owners to contribute capital to the company, limiting the authority of owners to bind the company, and other information desired by the owners.

The members of a limited liability company usually enter into an operating agreement to govern the company's internal affairs. The operating agreement of a limited liability company is similar to the bylaws and shareholders' agreement of a corporation or to a partnership agreement. The agreement remains confidential since it is not filed with the secretary of state. Operating agreements typically cover capital contributions, allocation of profits and losses, distribution of earnings, management, transfer of investment, and dissolution of the company.

State laws require that the name of a limited liability company include the words "limited liability company," the abbreviation "LLC" or a similar notation of limited liability. The name of the company must differ from that of existing businesses to avoid conflicts with the names of other companies and partnerships. The process of naming the company ordinarily includes reserving a name with the secretary of state and then filing articles of organization using the name.

The process of naming the company can also include state and federal trademark registration if the name will be used on the company's products or associated with the company's services. A federal registration provides nationwide protection while state registration only protects against person who infringe upon the name in the state of registration. Although registration is not legally required, it can provide a strategic advantage in the event of a dispute and it will also discourage others from using the name.  The attorney's at Klein and Fortune, P.A., can also file for your trademark or service mark.

A company conducting business in a state other than the one in which it was organized must comply with that state's requirements for foreign limited liability companies. A company ordinarily must have a registered agent for service of process, file an annual report, and pay an annual fee. Companies usually do not need to register in other states if they engage in a single job or contract. Registration in a foreign state will be required if your company has an office or has numerous contacts over an extended period of time.

Properly structured limited liability companies are not subject to state or federal income tax. Instead, the owners of the company pay tax on its income as if it were a partnership.

In addition to the requirements of state law, a limited liability company must meet certain tests established by the Internal Revenue Service to assure that it will be taxable like a partnership. The tax regulations require that the company avoid continued existence, free transferability of interests and centralized management.

The lawyers at Klein and Fortune, P.A., can help you to draft your company's organizational documents to satisfy the requirements of the Internal Revenue Service. 

Limited liability companies are gaining widespread acceptance and many experts believe that they will become the preferred way of operating for both small and large businesses. Unlike a limited partnership, a limited liability company allows owners to participate in the management of the business. Unlike a corporation, a limited liability company does not require formal rituals like director and shareholder meetings. The lawyers at Klein and Fortune, P.A., can help you to use a limited liability company to start a new venture or to simplify the structure of an existing business.