LLC Structure Provides Distinct Advantages for Business Owners

LLC Structure Provides Distinct Advantages for Business Owners

In today’s business climate it is very important for business owners to protect their personal assets.

The limited liability company (“LLC”) is becoming the entity of choice for business owners to do so.

That’s because the LLC structure offers business owners two distinct advantages – protection and flexibility. LLC owners, known as members, enjoy protection of their personal assets and have wide flexibility in determining how the business is operated and how profits are distributed.

To understand these advantages, it is important to understand some LLC basics. In Ohio, an LLC is formed by the filing of articles of organization with the Secretary of State, the appointment of a statutory agent and the acceptance of the appointment with the Secretary of State.

The LLC’s name must be unique among those of companies and other trade names on the Secretary of State’s records. Name availability can be checked on the Secretary of State’s website or by calling the department.

The owners of a limited liability company are called members, and they are similar to shareholders in a corporation. In general, LLCs can have several members or just one, and they need not live nearby nor even in the same state.

Internal workings of an LLC are governed by its operating agreement, a validly written or oral agreement of its members. It is always best to have a written operating agreement.

One of the primary advantages of the LLC structure is the flexibility that can be built into the operating agreement.

For example, although control over a limited liability company is usually vested in the members, the operating agreement can put a non-member manager in control.

Also, LLC members can have different interests in profits, losses, income and credits, just as partners may, without concerns about the entity liabilities or the degree of participation in management that exist with some other business structures.

Although an LLC member can assign the right to receive distributions of profit from the entity, typically no member can transfer the total interest in the LLC without the consent of the other members.  This characteristic protects the management of the company for the other members.

Another key advantage to LLCs is the protection they provide. Members and managers of an LLC are not personally liable for its debts, liabilities or other obligations.

The LLC exists separately from its members and is liable for its own debts.

Also, a member or manager does not lose liability protection by being active in management of the business. So the owners can be active in management, yet still enjoy protection of personal assets.

An LLC enjoys continuity of existence, so members do not need to worry about re-establishing it after a certain number of years.  It is dissolved only as specified in the operating agreement, upon the consent of the members or upon judicial decree.  A member’s death, retirement or withdrawal for any other reason does not cause dissolution.

A limited liability company provides the business owner flexibility to structure the business in a way that works best while still maintaining the protection of his or her personal assets.

L’Italien is a business attorney in HHM’s office in Salem, Ohio.  She can be reached at or at (330) 337-6586