Businesses are created frequently throughout the United States. These businesses are created by one person or multiple people and are labeled in different ways. The recent most popular form of business entity is a Limited Liability Company. The following papertwo different types of LLC and how they are formed. It will also touch base on several forms of business entities and the advantage and disadvantages of them.
There are several types of Limited Liability Companies (LLC) but to understand the differences between them an LLC needs to be defined. “An LLC is an unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations” (Cheeseman, 2010, p. 613). LLCs were first seen in 1977 in the state of Wyoming and are currently available in every state as a form of business entity. They are regulated under state laws and are considered its own legal entity separate from the person(s) that created and own the business. “LLCs are treated as artificial persons who can sue or be sued, enter into and enforce contracts, hold title to and transfer property, and be found civilly and criminally liable for violations of law” (Cheeseman, 2010, p. 613). Since an LLC have been defined the following chart compares the differences between two types of LLCs, the first is a regular Limited Liability Company and the other a Single Member Limited Liability Company.
Differences Between an LLC and SMLLC
Limited Liability Company (LLC) Single Member Limited Liability Company (SMLLC)
Number of Member
One or more people are involved. One person.
Taxes An LLC can be taxed as a partnership or a corporation.
An SMLLC can be taxed as a corporation or as an entity separated from the owner, meaning a disregarded entity or sole proprietor.
All members have a say but the process can be cumbersome; Also a member can make a decision on behalf of
References: Cheeseman, H. R. (2010). Business Law. Legal Environment, Online Commerce, Business Ethics, and International Issues (7th ed.). Retrieved from The University of Phoenix eBook Collection database. University of Phoenix. (n.d.). How to form a Single Memeber LLC. Retrieved from University of Phoenix, LAW531 website.