What is an LLC?
An LLC is a type of business structure in the United States of America that is popular for its combinational features of a partnership and a corporation. Limited Liability Companies can be of different types based on various factors like the location of the company, the organizational structure, etc. In this article, let us discuss some of these types of LLC in brief.
Types of LLC based on the location of operation and registration
- Domestic LLC – A domestic LLC is a company that is operating in the same location of its creation. If you form an llc in montana, then your company is a domestic LLC of Montana. Normally, people will use the term LLC for a domestic company.
- Foreign Limited Liability Company – If the company operating in one region wishes to expand its services to another region or transfer its operation to another State, it should register as a foreign LLC in that region. Let us consider you have a Montana LLC and wishing to relocate or expand your branch to South Carolina. Then, you should go to the secretary of the State of South Carolina and do the formalities to register yourself as a foreign LLC.
Types of LLC based on the management structure
Based on who is managing the entity, the LLCs are classified into two types. If you are about to start an LLC, it is the first thing to consider. Since it deals with the central functioning of the company, you should be clear on who should manage the LLC.
- Member-manages LLC – member-managed LLCs will consist of either one or a small group of members who will have all the control over the business and share an equal profit.
- Manager-managed LLC – In the case of Manager-managed LLCs, there will be one or a few managers who will make the vital decisions of the company and will get the financial contributions alone from the non-active members.
Types of LLC based on the number of members and tax returns
If the LLC is owned by a single person, it is known as a single-member LLC. In contrast, an LLC with multiple members with equal or agreed-rights is known as a Multi-member LLC. There are some advantages and disadvantages to both types based on tax returns.
Type of LLC based on the professional liabilities
Apart from the other types of LLCs, there is one particular type everyone should know. It is a Professional Limited Liability Company. If you are a professional in the service sector like an accountant, legal practitioner, or in the medical field, you should meet some additional requirements to form your LLC. The rules and protection of liabilities for a professional will be different. If you have stuck with any malpractice issues, your private assets will not fall under the protection of LLC. Likewise, there are many differences in forming a Professional Limited Liability Company. So, it is advisable to consult with industry experts to form a company.