A favorable factor that influences clients to form limited liability companies is that they are a type of business ownership that maintain the interest of owners and protects their personal properties. If a LLC is dragged into a court case or incurs losses, owners are not bound to declare bankruptcy. In such cases, their personal assets remain 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 proprietor directly owns the business and is personally liable for debts. The only exception he enjoys is complying with any related licensing requirements, as there are no formalities to be fulfilled.
Limited Liability Partnerships, LLP, permit attorneys and accountants to operate their practices. This arrangement is a type of general partnership that is treated as an LLP, by registering with the Secretary of State. Many attorneys and accountants find LLPs a feasible option as it protects the partners from liabilities.
A non-profit type of LLC is designed for businesses that engage in charitable, religious, educational or scientific activities. These cannot issue shares or pay dividends. On dissolution, they have to distribute their remaining assets to another nonprofit organization. They are created to help society and their annual income is used to fund their non-profit goals. Company profits are not shared amongst individual officers, members or directors.
S Corporation type of LLC offers "limited charge of protection" to shareholders. S Corporations begin their survival as a general, for-profit corporation, by filing Articles of Incorporation at state level. A general for-profit corporation, also known as a 'C corporation', is a type of LLC required to pay income tax on taxable income earned by the corporation. In comparison to a LLC, S Companies are governed in a less flexible manner.
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