One favorable factor that influences clients to form limited liability companies is that they are a type of business ownership that maintains the interest of the owners and protects their personal property. If an LLC is dragged into a court case or incurs losses, the owners are not required to file for bankruptcy. In such cases, your personal assets are protected. This feature has prompted the establishment of different types of LLCs.
A single member LLC is the simplest form of business and a sole proprietorship directly owns the business and is personally liable for debts. The only exception he enjoys is meeting the related licensing requirements, as there are no paperwork to go through.
Limited Liability Partnerships, LLPs, allow attorneys and accountants to operate their practices. This arrangement is a type of general partnership that is treated as an LLP, upon filing with the Secretary of State. Many lawyers and accountants consider LLPs to be a feasible option, as it protects partners from liability.
One type of nonprofit LLC is designed for businesses that are engaged in charitable, religious, educational, or scientific activities. They cannot issue shares or pay dividends. Upon dissolution, they have to distribute their remaining assets to another non-profit organization. They are created to help society and their annual income is used to finance their non-profit goals. Company profits are not shared between individual officers, members or directors.
S Corporation type of LLC offers “limited charge protection” to shareholders. S corporations begin their survival as a general for-profit corporation by filing articles of incorporation at the state level. A general for-profit corporation, also known as a ‘C corporation’, is a type of LLC that must pay tax on the taxable income earned by the corporation. Compared to an LLC, S companies are less loosely governed.