Limited Liability Company

A limited liability company (LLC) is a form of fictitious entity that combines advantages of a corporation with those of a partnership. An LLC allows the investors and managers to not be personally liable for the LLC’s debts. It also allows for only the investors to pay income tax, not the entity itself. An LLC must have a registered agent in the state where it was formed and in each state where it’s authorized to do business. A registered agent is an individual resident or a corporation in the state that consents to receive service of process should someone want to sue the company.

To maintain recognition of the entity, you must pay annual or semiannual filing fees to the state of establishment and any other states where "doing business", you must maintain company records including meetings of members in accord with an operating agreement, which governs the operations of the company, you must never co-mingle company funds with your personal funds, e.g., never use the company check account to pay for personal expenses. The company should be adequately capitalized also. If you do not keep these points in order, a court may not recognize the existence of the entity and hold the investors or managers personally liable for company debt. This is called piercing the corporate veil. Also, when entering into any contract, make sure that the manager signs on behalf of the company rather than personally.

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