Limited liability companies (LLCs) are a relatively new form of business organization allowed in Missouri. In recent years, LLCs have become more popular than corporations.
In concept, an LLC functions much like a partnership, but it has most of the advantages of a corporation in terms of limiting the individual liability of its owners for business obligations.
An LLC is formed by filing Articles of Organization with the Secretary of State. The owners of the LLC, who are called members, manage the company unless they agree in the Articles of Organization to provide for centralized management by a manager.
After the Articles of Organization are accepted by the Secretary of State, an LLC must also adopt an Operating Agreement in order for the LLC to be considered legally formed under Missouri law.
Some advantages of an LLC as compared with a corporation are:
- Many of the on-going formalities required in a corporation are not required of an LLC.
- An LLC is treated much like a partnership for tax purposes, whereas a corporation must make a special Subchapter S election to achieve similar tax treatment. An LLC does not pay tax itself, but reports its income (or loss) on an informational tax return that also allocates the income or loss to the owners. The owners then report the income or loss on their personal tax returns.
Some disadvantages of LLCs as compared with corporations are:
- An LLC may be more expensive to set up initially. This is because the higher degree of flexibility in organizing an LLC requires a more complicated organizational document which must be tailored to meet the organizers’ particular desires.
- Because LLCs are a relatively new phenomenon, there are still unresolved questions about how particular legal issues will be resolved by the courts when they arise through litigation. In particular, there are lingering questions about how much individual liability insulation an LLC gives to its owners. In contrast, most such questions about corporations have already been answered by many years of court decisions. The trend, however, is that LLCs are seen by the courts as analogous to corporations in most circumstances.
Scott Law Firm organizes LLCs and provides continuing legal representation for them. Flat fees are charged for simple LLCs. For more complicated LLCs, charges are based on our hourly rate.
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