Running a Limited Liability Company (LLC) in Detail
A limited liability company (LLC) is a hybrid commercial entity that combines the characteristics of a corporation and a limited liability partnership. There are two main types of LLCs: Manager-Managed LLCs and Member-Managed LLCs.
Types of LLCs
Manager-Managed LLCs are managed by a hired employee-manager who is not a member of the LLC. This individual is typically referred to as a Manager. The management can be appointed by one or more members according to a Limited Liability Company Member Agreement and the Limited-Liability Company Articles of Organization.
Member-Managed LLCs, on the other hand, are managed by one or more members of the LLC. These members are responsible for making decisions and overseeing the operations of the company.
Ownership Structure and Management Role
The owners of an LLC, referred to as Members, can appoint one or more Managers to run the company. However, the Members retain the ultimate authority to appoint, remove, and replace these Managers. This structure provides flexibility and allows for various governance models.
Taxation and Benefits
The most prominent feature of an LLC is pass-through taxation. Members can elect to be taxed on their membership share as if they were partners in a partnership, rather than as a separate entity with shares that are no more numerous than the number of members. This pass-through taxation can provide significant tax benefits, such as reduced tax liabilities and the ability to allocate income and losses among the Members.
Who Can Run an LLC?
Anyone can run an LLC, depending on how you interpret the term “run.” The Members can appoint anyone to manage the company, even if they prefer not to be actively involved in day-to-day operations. Many LLCs are formed and owned by investors who prefer to hire others to make decisions and handle the day-to-day operations. However, the Members always retain the right to hire and fire the individual who is running the company, provided that the action is within the terms agreed upon in the contract between the LLC and the hired individual.
Legal Considerations
It is important to note that, while the information provided herein is useful for general knowledge, it should not be construed as legal advice. I do not provide legal advice or services through this platform. Legal advice should be sought from a competent local attorney who is familiar with the specific laws and regulations governing LLCs in your jurisdiction.
For detailed legal guidance and personalized advice regarding your LLC, please consult with an attorney in your state or country.
Disclaimer: The statements made herein are provided as general information and should not be relied upon as legal advice. The correctness of these statements may vary based on the specifics of your circumstances.Key Takeaways:
LLCs combine characteristics of corporations and limited liability partnerships. LLCs can be manager-managed or member-managed. Members can appoint managers to run the company but retain ultimate control. LLCs offer pass-through taxation, which can provide significant tax benefits.For more information on running an LLC and understanding the legal requirements, consult with a local legal professional.