If you plan to start a business, you can adopt several business models depending on how you want to run your business. The range of business structures ranges from sole proprietorships to huge corporations. The limited liability company (LLC) model is quite popular in business circles due to its range of benefits. A closer look at this business model reveals that LLC is a hybrid version that meshes the flexibility of a partnership with the asset protection aspects. That said, here are some facts to know about the LLC business model.
Separate Legal Entity
As the name suggests, this business model is viewed as a separate legal entity. This means that it can enter into contracts, buy property, or file a lawsuit under its name.
An LLC is a separate legal entity. This means that the owners have limited liability. Ideally, this means that the owner’s assets cannot be used to satisfy the company’s debts and obligations. The shareholder’s risk of loss is only limited to the number of shares each individual has in the company. Even though you invest to earn some profit, investing in an LLC also takes care of your investment if the business collapses.
An LLC boasts of a lengthy existence unless the article of association states otherwise. This means that owners can change at any time and not affect the operations of the company. Therefore, a member’s withdrawal, death, or retirement from the company will not cease its operations.
In some cases, LLCs can be dissolved when the following scenarios happen.
- All members consent to a dissolution
- Following judicial action to dissolve the company
- An event defined in the operational agreement occurs
LLCs offer many options as far as management is concerned. Legally, the choice of management rests with the members. Managers can be chosen from the members, or they can opt to hire professionals. This aspect of flexibility means that you can have a few people form an LLC and run it together or you can have owners spread all over and have a team of professionals do the work for you.