What is a limited liability company?
A limited liability company (“LLC”) combines the corporate aspect of limited liability for its members, regardless of the extent to which they take part in the business, with the tax advantages of a partnership. Instead of shareholders as in a corporation or partners in a general or limited partnership, the owners of an LLC are called “members”. A member may be any “person” which includes and individual, partnership, limited partnership, trust, estate, LLC, foreign LLC, domestic or foreign corporaiton, unincorporated association or other entity.
To form an LLC in North Carolina, strict compliance with state law is required. Generally, these requirements include preparing and filing of articles of organization, conducting an organizational meeting, establishing the books and records of the LLC, preparing and adopting an operating agreement, issuing ownership interests in the LLC, and filing of any required reports with appropriate federal, state, and local offices. There is no requirement that the operating agreement be in writing, however, without a written agreement, the laws of the state of formation will control and govern.
An LLC may elect to either be managed by all of its members or by designated managers. Alternatively, an LLC may elect a more formal corporate management structure with designated officers similar to that of a corporation.
What liability do the members of a limited liability company have?
A member or a manager of an LLC is generally not personally liable for the debts and obligations of the LLC beyond his or her contribution. However, a member or a manager may become personally liable as a result of his or her own acts or conduct, or if he or she personally guarantees debts or obligations of the LLC.
The LLC may elect to be treated as either a corporation or partnership for federal income tax purposes. LLCs can have several classes of equity and debt thus providing greater flexibility to its members in the structuring of their financial interests.
Unique Asset Protection Qualities Of An LLC
When dealing with a multimember LLC, a Member’s Membership Interest in such LLC is not subject to seizure and sale by a judgment creditor of a Member as stock is in a corporation, but limits the judgment creditor of a Member to only being able to obtain from a Court a charging order as to any amounts disbursed by the LLC to such Member.
What are Professional Limited Liability Companies?
Certain groups of professionals may engage in professional services through a professional limited liability company (“PLLC”) subject to the same terms and conditions for the rendering of professional services through a professional corporation under North Carolina General Statutes Chapter 55B, the Professional Corporation Act.