Question

What are the important features of a limited liability company? Explain.​

Answer 1

LLCs combine features of corporate businesses and sole proprietorships. They dissolve in case of bankruptcy or the death of a partner while corporations can continue their operations if any of these happens. The company is dissolved if a partner leaves. The other members can start a new company or partnership.

There are certain advantages to incorporating an LLC. One is that the partners can choose how to be taxed – like a C or S corporation, partnership, or sole proprietorship. Double taxation does not apply. Another advantage is that LLCs have less record keeping, including supporting documents, records, books, and reports. Corporations are not required to hold quarterly or board meetings. The owners are not responsible for poor financial, management, and legal decisions made by one partner. In addition, the partners can choose how to distribute the profits. Investors have no or little say in the normal operations of the company, unless specified in the operating agreement. The requirements for running an LLC are not as strict as that for corporations, which gives businesses more flexibility.