How does an LLC
This is how the LLC corporate form works
In the case of the LLC - similar to the corporation - the personal liability of the shareholders is restricted and the personal assets of an owner are separated from the company assets. In addition, there are few legal restrictions in connection with the ownership structure, which means that natural persons (including those without US domicile) as well as partnerships and corporations can be shareholders of an LLC.
One of the advantages of a limited liability company is that it is easy to set up compared to a corporation. The LLC is created by submitting the articles of organization to the Florida Department of State (comparable to the German commercial register). A minimum capital contribution is usually required.
A striking difference between a corporation and an LLC is that a corporation issues share certificates to its shareholders, whereas in the case of an LLC, the shareholder relationships are regulated in a partnership agreement, a so-called "Operating Agreement". The LLC is only subject to a few mandatory regulations and is therefore much more flexible than a corporation.
In principle, all shareholders are authorized to manage and represent (“Member-Managed LLC”), but management can be transferred to a so-called “Board of Managers” (“Manager-Managed LLC”) through corresponding provisions in the Operating Agreement. The structure of the LLC also leaves room for the one-man company (“Sole Member LLC”). The corporate form of a corporation is only to be preferred in cases when it can be foreseen in the founding phase that there will be a large number of shareholders and that in future shares will be publicly sold or listed on the stock exchange.
The LLC avoids double taxation of the profits / losses of the company, as it is treated as a legal person for tax purposes as a "pass-through entity" and the individual shareholders record these profits / losses in their personal tax return according to their respective shares. In most cases, the choice of an LLC is therefore more advantageous for the individual shareholder. However, a tax expert should be consulted before the establishment in order to have the situation examined in detail on a case-by-case basis.
The LLC corporate choice has become a vehicle of choice for start-ups, subsidiaries of overseas corporations, and for individuals looking to gain a foothold in Florida on business (often in connection with an investor visa). The LLC allows the owner great flexibility in connection with the day-to-day running of the company, the distribution of profits and with changes to the company's articles of association.
It is particularly important for owners of a "closed corporation" to fulfill the comprehensive, legally binding formalities - such as the establishment of a board of directors, holding an annual general meeting, etc. Loss of liability protection and possible creditors of the company may gain access to the property of the owner. A closed corporation, in turn, is a corporation in which very few people (often members of the family) hold shares and shareholders participate in the management of the company. In an LLC construct, owners can bypass many of these requirements through cleverly structured articles of association.
Articles of Association for LLCs should definitely be drafted by an attorney who specializes in corporate law as there are many details related to running the company, delegating certain responsibilities to the state of incorporation and the tax authority, distribution of taxes / profits / losses and any Transfer claims of the company shares must be taken into account.
This article does not constitute legal advice, but is for general information only.
About the author:
Mark S. Scott is Attorney at Law and Partner at Kirkpatrick & Lockhart Preston Gates Ellis LLP in Miami. Telephone (305) 539-3300,
Email: [email protected]
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