In addition to the usual legal forms under which businesses may operate, such as partnerships and corporations, the law also recognizes, as a separate legal entity, Limited Liability Companies.

A Limited Liability Company (LLC) is created when one or more people execute and file Articles of Organization with the Department of State.   The valid formation of a LLC also requires publication or notice in newspapers within the county in which the LLC maintains its office.

Similar to the powers of a corporation, a LLC is empowered, among other things, to sue or be sued; purchase, own, sell, assign and encumber real or personal property; borrow money and enter into contracts; maintain employees; and otherwise conduct its business.

The owners of the LLC are called members and the extent of their ownership interest is measured by the amount of their capital contribution to the LLC, much as a shareholder’s ownership in a corporation is measured by how many shares the shareholder purchased.

Unless otherwise stated in the Articles of Organization, profits and losses of the LLC are allocated, among the members, proportionately, on the basis of the value of each member’s monetary contribution to the LLC.

In the next installment we will discuss the management and related issues of an LLC.