- What Is A Limited Liability Company ("LLC")?
A limited liability company, like a corporation, is a legal entity existing separately from its owners. In New Jersey, a limited liability company is created when Certificate of Formation is filed with the Department of Treasury. A limited liability company is not a partnership or a corporation, but it combines the corporate advantages of limited liability with the partnership advantage of pass-through taxation.
- What Is The Organizational Structure of an LLC?
Unlike a corporation, and LLC gives its members flexibility in organizing the Company. One of the virtues of a limited liability company is the ability to structure the limited liability company however its members want it to be structured.
Generally, a limited liability company is owned by its members, who may directly manage the limited liability company, or who may appoint managers to directly manage the limited liability company for them. The members may also apportion duties amongst themselves as they see fit, and may even appoint one or more of their members to have the duties traditionally associated with a corporate president, vice president, secretary or treasurer.
- What Are The Advantages Of Forming A Limited Liability Company?
As the name suggests, one major advantage of a limited liability company is limiting the liability of its members. Unless they personally guarantee them, the members are not liable for the contractual debts and obligations of the limited liability company. In a partnership or sole proprietorship, creditors may seize personal assets of the participants to pay debts of the business.
Additionally, pass-through taxation is available, meaning that the earnings of an LLC are not subject to corporate double taxation (as is the case with corporations other than S-corporations), and the members have greater flexibility in structuring the limited liability company than is ordinarily the case with a corporation. This includes the ability to divide ownership and voting rights in unconventional ways while still enjoying the benefits of pass-through taxation.
- What Are the Disadvantages of Forming a Limited Liability Company?
In New Jersey, forming Limited Liability Companies can be more expensive to form than S-Corporations, but the additional expense is usually not substantial. Also, the law regarding LLC's is not as well-established because they have not been in existence in New Jersey for nearly as long as corporations. Thus, there is thus less law interpreting the limited liability company statutes and the rights of limited liability company members. However, case law to date suggests that the development of the law will be similar to the law as it has developed over the years regarding corporations.
- What Paper Work is Involved with a Limited Liability Company in New Jersey?
First, a certificate of formation must be filed with the State Department of Treasury. Second, if the limited liability company is to be structured properly, an Operating Agreement and organization minutes must be prepared. There are many different issues that can be addressed in the Operating Agreement depending on the circumstances of your company. You should discuss your individual situation with your attorney for advice on how to best prepare your Operating Agreement.
- What Is The Difference Between An LLC And an S-Corporation?
S corporations and limited liability companies both permit pass-through taxation, but a limited liability company is more flexible in allocating income amongst the members. Also, an LLC may offer several classes of interest while an S-corporation may only have one class of stock.
- What Are The Requirements For Naming Your Limited Liability Company?
The name you select must not be the same as or deceptively similar to an existing company in your state. For this reason, it is advisable to conduct a search of the public records to determine if the name you wish to use is available. Also, the name you choose must show your business has limited liability. New Jersey requires that the LLC be followed by "Limited Liability Company" or by the abbreviation, "LLC".
- Is There A Minimum Number Of People Needed To Form An LLC?
Both the IRS and New Jersey Law allow one member LLC's to qualify for pass-through tax treatment
THE PURPOSE OF THE ABOVE IS TO PROVIDE GENERAL INFORMATION. IT DOES NOT CONSTITUTE LEGAL ADVICE, AND IT DOES NOT ESTABLISH AN ATTORNEY/CLIENT RELATIONSHIP. YOU SHOULD RELY ON IT FOR GENERAL INFORMATIONAL PURPOSES ONLY. YOU SHOULD SEEK THE ASSISTANCE OF A QUALIFIED ATTORNEY WITH QUESTIONS THAT PARTICULARLY AFFECT YOU.