Investing With an LLC (Limited Liability Company)
Understanding Limited Liability Companies and Why They Are Important
Many investors have never owned a stock or bond. Instead, they have most of their net worth tied up in a family business or startup. In the past twenty years, Limited Liability Companies, or LLCs, have become one of the most popular ways to hold ownership stakes in these types of businesses.
There are unique benefits and protections afforded to the LLCs owners make it easy to understand why they are so highly favored. It is essential for you, as a new investor, to understand how they work, why you should care about LLCs and some of the tax implications.
This collection of LLC articles, including Limited Liability Limited Partnerships which are a relatively new legal entity that combines aspects of a limited partnership with a limited liability company, will explain the basics to you so you can educate yourself before meeting with a qualified professional.
A limited liability company, or LLC as it is often known, is a type of business that combines the benefits of a corporation with the benefits of a limited partnership. The most notable advantages include pass-through taxation, asset protection, limited compliance rules, and less rigid structures for management. If LLCs have sparked your interest, take some time to read over this list of important pros, cons, and considerations before deciding to buy equity in one or form your own.
All limited liability operating companies, or LLCs, are supposed to be governed by a contract that the investors sign amongst themselves prior to the company's formation. This contract is known as an LLC operating agreement and provides vital information to the company's policies, priorities, and procedures, and is required by many states to be presented with their application for incorporation. Here are just a few of the most important provisions you are likely to see in a standard LLC operating agreement.
Over the past twenty years, the state of Nevada has been working hard to attract businesses and corporations to incorporate within its borders and set up shop. Its pro-business campaign was a success. A lot of lawyers and financial advisers now espouse the benefits of using a so-called Nevada LLC to hold family businesses, investments, or other assets. These benefits include asset privacy, favorable tax laws, shareholder anonymity, and much more.
A Delaware LLC offers would-be business owners a lot of advantages such as low or no taxes, asset privacy, low annual filing expenses, easy start-up processes, and asset protection from creditors. In fact, investing through a Delaware LLC is often a top choice for many professionals, and was long before Nevada changed its laws to compete with them. Here are just a few reasons you may want to consider incorporating your business or holding your investments through one of these entities.
To take advantage of economies of scale, families will often pool their money together to form small businesses, invest in shares of stock, bonds, or mutual funds, develop real estate, or any other business or investment venture. How these family LLCs operate will be defined in their operating agreement. Walton Enterprises, LLC, for example, is a famous family limited liability company through which members of Sam Walton's family control Wal-Mart Stores, Inc., a regional bank named Arvest, and other investments. Discover how family limited liability companies can work for you.
To help make limited partnerships as appealing and useful as limited liability companies, roughly half of the states in the United States have allowed for the creation of a new type of entity known as a limited liability limited partnership or LLLP. It functions similarly to an LLC but has its own unique advantages and disadvantages. How does this new legal entity work and is it right for your family business or investments?