Fundamentally, a Limited Liability Company (LLC) internal functional and financial operations are a creation of the Operating Agreement. A Limited Liability Company bridges the gap between a corporation and partnership. Put in other words, it assumes the responsibilities of management and tax obligations and or options that a partnership and the liability in a limited choice of a corporation.
Those who own an LLC are called members. The LLC has therefore to assume two forms of management which are either managed by the members who are part of the LLC and therefore referred to as member-managed LLC or administered by individual members who are not part of the LLC and therefore termed as manager-managed. In California for example, the California’s Revised Uniform Limited Liability Company (RULLCA) the management structure that is dominant is the member-managed.
The formation of LLC’s is done under the official state actions which act as the organizers. This consolidation together of the LLC’s also comes with responsibilities too which include tax remittances. A huge number of LLC’s opt to be taxed by the IRS while taking the position of either partnerships or corporations. All these different forms the LLC can adapt to pose for tax payment is dependent on the number of members and election the LLC’s hold.
In case of debt payment creditors of LLC cannot reach the personal assets of the members. LLC protect its members, and this is further evident by the fact that an LLC can declare bankruptcy while the members are not. In cases where there is disrespect shown to the legal form of LLC however, members of the LLC may lose the privilege of limited liability. In this case, the members will have taken part, or directly treat the LLC property or assets as their own. Secondly, failed to adhere to the legal formalities present. Thirdly, mixed their funds with the funds of the LLC. Fourthly, undercapitalizing the LCC intentionally and by extension rather than paying off creditors, the members can decide to pay themselves hugely. Finally, Holding the LCC as alter ego for its members, Operating Agreements lawyer in Los Angeles will help members to see to it that there is upholding of particular contract facts to ensure there is no defaulting in the following of such regulations as this could lead the members into legal tensions.
Just like any other form of business, an LLC has disadvantages and advantages. The underlying defect for example of an LLC over other firms types is that LLC' s in California must pay a franchise tax annually, this is usually at $800. Furthermore, LLC's with gross revenue more than $250, 000 pay an additional gross receipt tax of about $900. Another reason as to why people may prefer other business forms like the corporation is that LLC's are relatively flexible and informal making individuals and or members sometimes to disregard the formal separation that has them on protection as limited liability partners of the business. As compared to corporations, LLC's have fewer case laws applying to them.
Members, therefore, have to operate Operating Agreements due to such disadvantages and challenges that are likely to occur as LLC’s members. Operating agreements filed through the best operating agreements lawyer in Los Angeles will help such members a great deal in defining their rights about LLC and hence limit the need to depend on RULLCA to form the internal regulations of LLC's on behalf of members.