A limited liability company (LLC) is a type of business organization that shares the limited liability benefits of a corporation coupled with the management and tax freedom of a partnership. An LLC is a legal entity that is only created under state law.
Limited liability means that all individuals who are associated with the company are not liable for damages beyond their initial investment. In addition, they cannot be held vicariously liable.
In other words, an individual who invests money into an LLC only risks losing the amount they invested. They will not be required to pay any more money if the company is still in debt.
This limits the risk of investing in a company. Organizations and business owners that are concerned with potential lawsuits or debts that may arise in connection with the business should consider forming an LLC.
If a business owner thinks that the type of business insurance they have on their business may not fully protect their assets, an LLC may be a good option.
How is a Limited Liability Company Different from Other Business Forms?
An LLC is different from other types of common business entities. In contrast to income from corporations, the income of an LLC is taxed only once.
In other words, the income will pass through the LLC and is only taxes at the individual member level. Other business with this tax structure include:
A limited liability company differs from a corporation in terms of its ownership structure. An LLC is owned by individuals, while a corporation is owned by shareholders.
An LLC differs from both sole proprietorships and partnerships in terms of liability. The partners in a partnership are held personally liable for debts that are incurred by the partnership.
This includes debts that are incurred by other partners. This means that, if the partnership owes money to a creditor, that creditor may come after the individual’s own real and personal property in order to satisfy the debt.
Owners of an LLC, in general, are not personally liable for liabilities or debts that are incurred by the LLC. This allows for LLC owners to manage the business without having to worry about losing their own personal assets.
Who Should Form a Limited Liability Company?
An individual who wants to own a small business should consider forming a Limited Liability Company. An LLC protects individual assets, which limits the liability to the LLC’s own resources.
By forming an LLC, if a small business owner is sued, they will not have to pay from their personal assets. An individual who is interested in forming a business with minimum paperwork and costs may also consider forming an LLC.
LLC formation requires filing articles of organization in addition to a fee with the state. This fee is usually lower than the fee that is required to form a corporation.
Forming an LLC typically requires less paperwork to be filed with the state than corporation formation. Additionally, keeping track of the income and expenses of an LLC are relatively easy.
With an LLC, a separate tax return filing is not required. Instead, the members and managers of the LLC report the income and expenses on their individual tax returns.
Managing an LLC can also be fairly simple. If an LLC has two or more individuals, it can draft an operating agreement.
In this operating agreement, the LLC members will include details regarding how the LLC is governed, which includes how the profits will be allocated as well as what members’ votes are required for certain actions. An operating agreement can also address how the LLC can be shut down, or dissolved.
It may also provide rules governing how disputes among the members of the LLC are to be resolved. In addition, the agreement may also address what occurs when a member of the LLC dies or becomes incapacitated.
What Does the LLC Protect and What Does it Not Protect?
Although an LLC protects its members’ personal assets from a lawsuit, this will not apply if the lawsuit arises from a claim of an LLC members’ negligence. If the court determines that a member of the LLC acted negligently, that member may be held individually liable for their negligence.
LLC members are also individually liable for intentional torts. For example, if a member of an LLC commits a battery during negotiations with another business, that LLC member will be individually liable for the battery.
What are the Requirements for an LLC in Georgia?
In order to form an LLC in Georgia, an individual must complete the following requirements:
- Choose a name for the LLC: Under Georgia law, an LLC name must include one of the following:
- Limited Liability Company;
- LLC;
- L.L.C.;
- Limited Company;
- LC; or
- L.C.;
- The term limited can be shortened to Ltd.; and
- Company may be shortened to Co.;
- An individual must also do a name check to see if the name is available in the state;
- File Articles of Organization and Transmittal form: In Georgia, an individual must file an Article of Organization with the Georgia Secretary of State. The filing fee is $100;
- In addition, an individual must file a Transmittal Form;
- Appoint a Registered Agent: Every Georgia LLC is required to have an appointed agent for service of process;
- An agent is an individual or business entity that agrees to accept legal documents on behalf of the LLC’s if it is sued;
- The registered agent can be an individual or a business that is authorized to do business in Georgia;
- The registered agent must have a Georgia physical address;
- Prepare all Tax Requirements: If the Georgia LLC has more than one individual, it must obtain its own IRS Employer Identification Number (EIN), even if there are no other employees;
- If an individual forms a one-member LLC, they must obtain an EIN for it only if it will have employees. An individual is also required to register with the Department of Revenue to file tax returns;
- Pay the annual registration fee: Once an LLC is formed, an individual has to file a registration each year and pay a fee of $50;
- The first registration fee payment is due between January 1 and April 1 of the year after the creation of the LLC. The following registrations are due at the same time in subsequent years; and
- Obtain all Business Permits and Insurance: Any business permits are required, if necessary. If the business needs it, an individual should obtain the right type of insurance.
What Paperwork Do I Need to Form an LLC in Georgia?
The documents required to form an LLC in the State of Georgia include:
- The Articles of Organization; and
- Transmittal Form.
These documents must be filed with the Secretary of State prior to the formation of the LLC.
What Benefits Does Georgia Give to an LLC?
The State of Georgia offers many benefits for business owners who form LLCs. The owner of an LLC has limited liability protections similar to a corporation.
In addition, there is a lot more flexibility for the distribution of profits from an LLC. A 50-50 split of profits is not required, as in a partnership.
An LLC is also very easy to operate, unlike a corporation. In addition, all of the business losses, profits, and expenses flow through the company to the individuals.
That way, the LLC would avoid the double taxation of paying corporate tax and individual tax.
What Disadvantages Does Georgia Give to an LLC?
There are some disadvantages to forming an LLC in Georgia. An LLC can be easily dissolved when a member of the LLC dies or goes bankrupt.
In addition, running a sole proprietorship or a partnership has less paperwork and is less complex. LLCs involve more paperwork than those business types.
Where Can You Find the Right Lawyer?
Starting your own business can be a very difficult but potentially lucrative adventure. In order to understand the distinctions and rights that will attach to your business and your organization, it may be helpful to discuss your business ideas with an experienced Georgia corporate lawyer.
Your lawyer can help you incorporate your LLC as well as explain the tax and organizational benefits of the limited liability structure.
