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CHARACTERISTICS OF AN LLC
Numerous clients are exploring the establishment of their business under the umbrella protection of a Limited Liability Company ("LLC") and therefore we thought it would be beneficial to give our readers a quick rundown of the characteristics of an LLC. The fundamentals of an LLC are as follows: |
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IN GENERAL
An LLC is a hybrid between a sole proprietorship or partnership and a corporation. It combines the "pass-through" income tax treatment of a sole proprietorship or partnership with the limited liability protection accorded to corporate shareholders. There are also further tax advantages to an LLC over an ordinary sole proprietorship. |
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ONE MEMBER REQUIRED  An LLC can have as few as one member (owner) or numerous members depending on how you want to structure the LLC. |
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SEPARATE LEGAL ENTITY
Like corporations, an LLC is recognized as a separate legal entity from its "members." |
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LIMITED LIABILITY
Only the LLC is responsible for the company's debts and judgments. This shields the individual members from individual personal liability. However, there are some exceptions where individual members may be held liable. |
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MANAGEMENT AND CONTROL
Management and control of an LLC is vested with its members unless the Articles of Organization provide otherwise. |
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VOTING INTEREST
Ordinarily, voting interest and profit distribution directly corresponds to the membership interest of the individual members as set forth in the Operating Agreement. This gives one a wide array of possibilities in the membership interest and the interest can be very widespread as long as this interest adds up to 100%. Such as 100% in one individual member or 1% in 100 individual members. |
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TRANSFERABILITY
No one can become a member of an LLC without the consent of members having a majority in interest (excluding the person acquiring the membership interest) unless the Articles of Organization provide otherwise. |
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FORMALITIES
The existence of an LLC begins upon the filing of the Articles of Organization with the Arkansas Secretary of State. The Articles must be on the form prescribed by the Arkansas Secretary of State.
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.
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If you would like more information regarding the formation of an LLC, please contact us and we can provide such information and the cost of establishing such an entity.