The LLC Advantage

Forming and maintaining an LLC has both general and specific benefits depending on your use for the company. Some companies are formed to operate in a business world, and others simply hold assets safely for an individual person, a family or a group. Many other specific uses are advantageous also. Depending on your perspective some benefits may be more important than others.

In general, the Delaware LLC is the most flexible type of entity ever offered by any State or Country in the world. Since the governance structure can be specified to fit the situation and purpose, it has become the entity of choice among legal, accounting professionals and business executives alike.

The governance of the company, or the rules are created in a contract called the Company Agreement. You can write up the terms and rules any way you want in the company agreement. This is the biggest benefit of an LLC over any other form of entity. It is called, Freedom of Contract.

The second general benefit is heightened asset protection against creditors of the members. If a member of an LLC has a judgment against him, the creditor cannot attack the LLC and take his portion of the assets. This protects everyone in the company.

The third general benefit of the LLC is the statutory limitation on the personal liability of the members. If an LLC fails and leaves behind a big debt, the members are not liable for its repayment. The top limit that a member of an LLC can lose by virtue of the LLC failing is the amount the member has invested in the LLC.

The forth general benefit of the LLC is its tax treatment by the IRS. Single member LLCs are not recognized by the IRS and therefore pay no taxes at all. Instead, the tax liability is passed through to the member and the income and expenses become part of their personal tax situation. The multi-member LLC may select the tax treatment they prefer when they apply for their EIN. They can be taxed as partnerships, corporations, trusts or other form of businesses.

The fifth general benefit of the LLC is the simplicity of its formation and continued annual maintenance as the entity performs its contracted duties. Very little information is required to form an LLC in Delaware and only a small filing fee. No required meetings have to be held and no voting has to take place except where your structure may desire a vote be taken.

The sixth general benefit of a Delaware LLC is the anonymity factor. You do not have to disclose any information about the beneficial owner of the LLC to the State of Delaware to form or maintain an LLC. Not all States are this flexible, and in Delaware you are required to have a contact person and a Registered Agent.

Many benefits are attained by using LLCs in specific situations, such as holding real estate, operating family owned businesses, performing estate planning objectives, owning intellectual property, holding the ownership of “dangerous” assets such as apartment buildings or fleet vehicles, forming joint ventures between companies and or individuals, attaining government contracts, etc...