A limited liability company (or LLC) is the US-specific version of an international corporation. It’s a complex business structure that combines the limited liability of an individual sole proprietorship or partnership with the protection of a Corporation. In the US, the term covers corporations, LLCs, and unincorporated partnerships. The advantages of a limited liability company are that it provides the maximum protection for personal assets and the business itself against lawsuits.
Unlike a corporation, Colorado LLC companies are not protected from the lawsuits of other people or businesses. As with sole proprietorships and partnerships, personal lawsuits stemming from negligence or theft can be brought against the members of the business. A partner in a limited liability company may also be personally liable for debts of the LLC, if he knew or had knowledge of the fraudulent. For this reason, partners should exercise proper care when making decisions for the LLC such as choosing the name, managing the LLC, funding and executing the LLC’s activities, and maintaining the LLC’s records.
Limited liability companies are an important method of business formation because they allow business owners to protect their business assets from lawsuits. As opposed to investing in expensive lawsuits, forming an LLC could protect personal assets and reduce risks. An LLC is formed by filing Articles of Organization with the state in which it intends to do business. The Articles of Organization of a LLC describe the LLC’s financial activities and the ownership structure of the LLC. A limited liability company has to register with the state before it can take the oath of office.
Another advantage of an LLC is that its assets and liabilities are limited. This means that unlike a corporation, there is no possibility that the assets of the LLC will be seized by creditors. As in a corporation, the owners of an LLC can have their income and assets taxed by the IRS. The only way to avoid paying taxes is not to form an LLC at all.
However, the main disadvantage of an LLC is that, like most businesses, it has to pay taxes on its income and assets. Unlike corporations, owners of an LLC are not required to pay corporate taxes. Instead, owners of an LLC must pay the personal income tax on their own.
Forming an LLC is not limited to small business owners alone. Any person owning property can become a member of an LLC. This includes individuals who are renting out their homes and even people who are holding joint tenancy with someone else. In fact, an LLC may be formed quickly without much hassle by any person owning property.