Limited Liability Company (LLC)
An LLC is a special type of company which was originally created to provide more flexibility than a corporation could. Even though the corporate restrictions have been changed in some areas, an LLC could still be the correct choice for your business. An LLC operates under the laws in South Carolina.
Ownership and operation
The owners of an LLC are called Members. Their ownership is represented, not by shares of stock, but by the percentage of ownership owned by each particular member. The total ownership, of course, must total 100%.
The LLC may be managed by the Members themselves, similar to a partnership, or by a Manager who may or may not be a Member.
Creation
An LLC is created by filing the properly completed Articles of Organization with the Secretary of State. Although an attorney is not required by State law to sign the Articles of Organization, it would be foolish for anyone to create such a complicated organization as an LLC without the assistance of a qualified attorney.
South Carolina has set up “default” laws for the operations of an LLC. These default laws apply to the LLC unless the LLC has “opted-out” through the provisions of an Operating Agreement. Typically the Operating Agreement will also function as a buy-sell agreement.
An LLC may be a Term LLC, in which case its existence will terminate at the end of the specified term. An LLC may alternately be an “at will” LLC in which case it will have a continuous existence.
Taxation
The IRS does not recognize an LLC as a taxable entity. If the LLC does not make a special election, it will be taxed as either a sole proprietorship or a partnership, depending on how many members it has. If the proper tax election is made, the LLC may be taxed as a corporation. This tax election obviously has serious financial consequences and should only be made upon the advice of your CPA and your attorney.
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