Clients getting ready to form a new business entity often seek guidance on the type of entity that is suitable for them. One popular choice is the limited liability company, or LLC.
An LLC essentially offers the limited liability characteristics of a corporation with the flexible governance of a partnership.
LLCs are often a good choice for the individual or small group of individuals looking for the limited liability characteristic, while preserving a higher level of flexibility in management, and avoiding the simplifying some of the administrative burden of other business forms.
Limited liability generally means that creditors of the LLC can pursue recovery from the assets of the LLC itself, but not from the personal assets of its members. Put another way, a member’s assets generally are at risk only to the extent of his or her investment in the LLC.
Simplicity is another advantage of the LLC. Corporations frequently require a more burdensome level of recordkeeping and administration. Governance of an LLC, whether by all of the members or certain designated managers, looks to the provisions of the operating agreement. The owners of an LLC, therefore, can reach agreement as to the procedures by which an LLC will be governed. With Limited Liability Companies, distributions and tax liabilities flow through to the members.
While there are many benefits to the LLC, they do carry somewhat higher filing and annual fees in Illinois. However, the value of the flexibility that LLCs can provide may make up for the higher level of costs.