Limited Liability Companies or LLCs are popular business format for a variety of reasons. First, they are less expensive to form and maintain than corporations. For small businesses starting out, this is a significant consideration. Second, the members of the LLC can choose to have profits taxed as an entity, or proportionately to the members, which makes it flexible from a taxation standpoint.
The LLC can be member-managed, as it typically the case with working “partners” in a business context, or manager-managed, as is often the case where an owner wants an employee to share in the profits, but not get in the way of the running of the business.
Forming the LLC typically involves entering into an Operation Agreement, filing Articles of Organization, registering with the state department of revenue, and securing an Employer Identification Number from the IRS.
Often, the formation of the LLC is part of a transaction to acquire a business, which creates a number of issues, from non-competition agreements to assignments of leases.