LLC Beginner’s Guide for Aspiring Entrepreneurs 2023 Edition by Gregory Olson

Author:Gregory Olson [Olson, Gregory]
Language: eng
Format: epub
Published: 2021-03-10T00:00:00+00:00

CHAPTER FIVE

Flexibility and Default Rules

A limited liability company which incorporates traditional corporate and partnership arrangements, is a highly versatile type of business arrangement. By establishing an LLC, you create a legal entity that provides its owners with limited liability. Sometimes they are mistakenly referred to as a limited liability partnership rather than a limited liability company. It is a truly hybrid business entity that can contain corporate elements and/or qualities, partnerships, and even sole ownership, depending on the number of owners involved. An LLC, while it is a company, is, in reality, a form of unincorporated company and not a company. The primary advantage of an LLC sharing with a company is the limited liability insurance provided by both. The key feature of an LLC sharing in a relationship is its passing income tax. However, it is much more versatile than an organization and is very good for individual owners.

You should recognize that either company or organization with limited liability does not always shield owners from liability. The legal system in the United States does allow a court system to pierce an LLC's corporate veil if any form of fraud or mistake occurs or if the owner uses the business as an 'alter ego.'

Rules of Flexibility and Default

All the LLC legal statutes contain a sentence similar to "except where otherwise provided for in the operating agreement," which gives the members of an LLC the flexibility to determine how their LLC is governed. Certain laws include default governance guidelines for an LLC, which apply unless an operating arrangement is reached.

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