LLC Corporations: Everything You Need to Know
There is no such thing as LLC Corporations so you don’t incorporate an LLC; rather, you register it with the state in which you choose to conduct business in.3 min read
There is no such thing as LLC Corporations. Therefore, you don’t incorporate an LLC; rather, you register it with the state in which you choose to conduct business in. A corporation business structure is different from an LLC in that LLCs operate as pass-through tax entities, whereby the profits and losses of the business pass through to the owners (members). Corporations, however, are different in that profits and losses of the corporation are taxed to the business itself rather than the shareholders of the business.
If you choose to form a new business, you can choose an LLC or a corporation, but these two business structures are different. Before you make such a decision, it is important and beneficial to speak to an experienced attorney who can help you determine which business structure is right for you. You can also speak with an accountant who is familiar in this area, and who can help you identify the tax benefits of operating an LLC or corporation.
Types of LLCs
There are a variety of unique LLCs, some of which are managed differently than others. Keep in mind that not all types of LLCs are available in all states, as only a few states offer certain types of LLCs. These include:
- Domestic LLC
- Foreign LLC
- Member-managed LLC
- Manager-managed LLC
- Single-member LLC
- Multi-member LLC
- Series LLC
- Restricted LLC
- L3C LLC
- Anonymous LLC
A domestic LLC is a business that is formed and located within the State in which you are conducting business. Therefore, state laws govern the way in which you form the LLC. This does not mean that the state governs the way in which you manage your LLC. Most states offer great flexibility in terms of the management structure of an LLC.
Foreign LLCs, however, are LLCs that are formed in another state (located in the U.S.). For example, if you are a domestic LLC in the State of NJ, you could be a foreign LLC in the State of NY. This means that your principal place of business is in the State of NJ, but you are still conducting some business in the State of NY. In addition to registering in the State of NJ, you would still need to register as a foreign business in the State of NY.
A member-managed LLC means that the members (owners) of the LLC manage the business themselves. Manager-managed LLCs are those with a third party manager overseeing the business. However, some multi-member LLCs choose a designated member to act as the manager of the business. Therefore, the LLC is not bringing in a non-member to oversee the company.
A single-member LLC means that there is only one member, whereas a multi-member LLC means that there are two or more members. Multi-member LLCs should always draft an operating agreement, regardless of whether or not it is required by the state. The operating agreement acts as a legally binding agreement regarding the management and decision-making processes of the business.
A series LLC is unique in that it acts as a master LLC (umbrella) over several other legal entities. The series can consist of members or asset managers. Keep in mind that a series LLC is only available in Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, and Utah.
A restricted LLC is only available in the State of Nevada. This type of LLC is restricted in the Articles of Organization, and cannot make certain distributions among members until the LLC has been in business for a period of at least ten years.
An L3C is a for-profit LLC that has some sort of philanthropic purpose. Therefore, it operates similarly to an LLC (for its tax benefits and added flexibility) and a non-profit business (for its charitable purpose).
An anonymous LLC means that the ownership information is not made publicly available by the state. Very few states allow this type of LLC, and the State of New Mexico is usually the only state that offers complete anonymity in terms of ownership.
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