- The limited liability company is a legal entity created by state law under the limited liability company act adopted by your state legislature. Most state acts, however, are based in large part on the (Revised) Uniform Limited Liability Company Act, or ULLCA. The ULLCA is recommended to all states by, a prestigious legal association known as the National Conference of Commissioners on Uniform State Laws.
- The purpose of the ULLCA and its various state-specific counterparts is to provide for a legal business entity that appeals to the business owner and creator. One of the primary advantages of forming a limited liability company is that it provides legal protection for the business owners. In a sole proprietorship or a partnership, the business owners are personally liable for the debts and responsibilities of the business, but with an LLC, like with a corporation, the business owners are not subject to personal liability.
- The ULLCA, and the state laws, provide a relatively simple method for creating a limited liability company. Under the ULLCA, the LLC is formed by filing a certificate of organization (referred to as articles of organization in some states) with the governing state agency, such as the state Department of Commerce or Department of Corporations. It is also wise, though not required, for the LLC owners to adopt an operating agreement and bylaws. The person who forms the LLC is referred to as the organizer.
- The owners of a limited liability company are called members. The organizer can also be a member. The member is similar to a stockholder in a corporation, and is also similar to a partner in a partnership. One of the distinctive aspects of the LLC, though, is that the members can also serve as the managers of the business operations. And, you may create an LLC with only one member, whereas with most corporations, you must have multiple stockholders, and by definition, a partnership must have at least two partners.
- Most limited liability company state laws provide alternative forms of limited liability companies. The purpose of the alternative form is to provide an LLC structure for professional businesses, such as law firms or accounting firms. For example, many law firms are organized as PLLCs, or Professional Limited Liability Companies. The PLLC allows state-licensed professionals to take advantage of the benefits of a limited liability company. Unlike in a typical LLC, in a PLLC each member must belong to the same licensed profession.
