By Liz Kudwa
Q: I am trying to decide what structure my company should have and am thinking seriously about organizing my company as an LLC. Is there any information at the library that can help me make this decision?
A: This is a great question and one that I am often asked. The Michigan Economic Development Corporation prepares a guide to starting a business in Michigan and in it is some great information on various ways to legally structure a business. Here’s what they say about limited liability companies.
An LLC may be treated as a partnership or sole proprietorship for U.S. income tax purposes and also provides the limited liability of a corporation. This option may be the preferred choice for certain new operations and joint ventures. Owners of LLCs are called “members”. These are comparable to stockholders in a corporation or limited partners in a limited partnership. To create a LLC, Articles of Organization are filed with the Department of Labor & Economic Growth, Bureau of Commercial Services, Corporation Division. The LLC must have an operating agreement written by the member of a LLC that has 1 member, or between all of the members of a LLC having more than 1 member, pertaining to the affairs of the LLC and the conduct of its business. If an LLC fails to adopt an operating agreement, the member or members will be unable to take full advantage of the benefits of forming an LLC and default provisions in the act will determine distribution and voting rights. Additional information, assistance, forms, statutes and publications can be found through the State of Michigan’s website — www.michigan.gov/corporations.
Here is a quick overview of the advantages and disadvantages of forming a limited liability company.
Advantages
o Limited liability
o Tax advantages
o Lower start-up costs than a corporation
o Greater flexibility in management than a corporation
o Less formal than a corporation
o No restriction on number of type of members
Disadvantages
o Transfer of ownership more difficult than a corporation
o Filing procedures vary from state to state
o Newest form of business structure and some persons or practitioners may not be completely familiar with proper organization and operating issues of a limited liability.
For additional reading on forming LLCs, check out any of these titles from the Capital Area District Library.
o Nolo’s Quick LLC by Anthony Mancuso
o Limited Liability Company: How To Form And Operate Your Own by Gregory C. Damman
o Form Your Own Limited Liability Company by Anthony Mancuso
o Your Limited Liability Company: An Operating Manual by Anthony Mancuso
o LLC Or Corporation?: How To Choose The Right Form For Your Business by Anthony Mancuso
Elizabeth Kudwa is the Business Reference Librarian at the Capital Area District Library located at 401 S. Capitol Avenue in Lansing, MI. Contact her at 517-589-9400 or by e-mail at kudwae@cadl.org.
