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Because of its similarities to the corporate structure, the Limited Liability Company (LLC) is often considered by the general public to be a type of corporation. Legally, however, the LLC is not at all considered to be a corporation. In fact, most states have enacted a completely separate and
distinct set of statutes specifically regulating the LLC form of business structure.
The LLC is actually a hybrid between a Partnership and a Corporation. The most significant feature of the LLC is that it provides many of the features of the corporation while requiring fewer formalities.
One LLC Member Required.
Historically, most states require that a Limited Liability Company be comprised of at least two LLC members. Today most states and the IRS recognize the single-member LLC as a legitimate business structure.
Separate Legal Entity.
Like limited partnerships and corporations, the Limited Liability Company shares a similar advantage -- it is recognized as a separate legal entity from its "members."
Limited Liability.
LLC Members (owners) receive protection of personal assets in a manner very similar to that afforded to corporations
Fewer Formalities
If a corporation fails to observe corporate formalities, such as holding an annual meeting, individual shareholders may be held personally liable for the corporation’s business debts. In an LLC, however, fewer formalities exist. For example, in California, an LLC’s failure to hold an annual meeting is NOT grounds for holding the LLC’s members personally liable for an LLC’s business debts since an LLC's failure to hold meetings of members or managers is not
usually considered grounds for imposing the alter ego doctrine where the LLCs Articles of Organization or Operating Agreement do not expressly require such meetings.
Management and Control
Management and control of an LLC is vested with its members unless the Limited Liability Company's articles of organization provide otherwise.
Voting Interest
Ordinarily, voting interest in an LLC directly corresponds to interest in profits, unless the articles of organization or operating agreement provide otherwise.
Transferability
No one can become a member of an LLC (either by transfer of an existing membership or the issuance of a new one) without the consent of members having a majority in interest (excluding the person acquiring the membership interest), unless the articles of organization provide otherwise.
Duration.
Historically, an LLC was required to specify a date of dissolution in its articles of organization. Today, however, many states will allow an LLC to maintain a perpetual existence.
Formation
The existence of an LLC begins upon the filing of the Articles of Organization with the Secretary of State. The articles must be on the form prescribed by the Secretary of State. Among the required information on the form are the latest date at which the LLC is to dissolve and a statement as to whether the LLC will be managed by one manager, more than one manager, or the members.
To validly complete the formation of the LLC, members must enter into an Operating Agreement. This Operating Agreement may come into existence either before or after the filing of the Articles of Organization and, in many states, may be either oral or in writing.
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