BASICS OF THE MISSOURI LIMITED LIABILITY COMPANY
A Missouri limited liability company or “LLC” is a form of company that can be created via filing certain documents with the Missouri Secretary of State.
The LLC has become the go to entity type for small businesses because of the protections it affords, the ease of administration, the tax benefits and because the LLC’s pass-through nature with tax filings, the affordability and speed in which they can be formed and, finally, the ease with which they can be wound down (dissolved).
This article will discuss each of these positive aspects of the LLC a bit deeper and this business creation lawyer O’Fallon will shed light on why each aspect makes the LLC often the best choice of how to create your business.
#1 LIMITED LIABILITY PROTECTION
LLC stands for “limited liability company”. Why is limited liability important? Because if you start a business as an LLC and say someone decides to sue you, they can only sue your for damages and if they get a judgment can only come after the LLC’s assets, not your personal assets. Thus, creating an LLC is a bit like wearing a lawsuit force field, at least in terms of your personal assets.
The limited liability, however, is not unlimited. The LLC shield can be “pierced’ in some cases by a court. A discussion of examples of this is enough for another article, but, generally speaking your assets are protected from liability if your LLC is sued.
#2 EASY ADMINISTRATION
Limited liability companies do not have shareholders. Instead, they have members and each member has a percent ownership in the company, not shareholder ownership as with a corporation. They can be member managed or managed by a manager. But, in either case, there are much less filing requirements than a corporation, which in Missouri has to annually file a report stating who the officers are. They also have to have an annual meeting and the requirements of that meeting are usually more formal than with an LLC annual meeting, which can usually occur much more informally. Thus, overall the administrative costs of an LLC and the time saved versus the additional filing requirements of a corporation make it a no-brainer for many new businesses.
#3 CHEAPER AND FASTER TO SET UP
Our office does not do rush filings for new LLCs, but the creation requirements are very straightforward and, at least in Missouri, can be created very quickly. Articles of Organization in Missouri can be printed. Because they are relatively fast to create, cheaper to hire a lawyer to create them versus a corporation. Because many limited liability companies are single member, many of our clients appreciate the quick turnaround.
#4 LLC = PASS THROUGH ENTITY
A big advantage of the LLC is that it is a pass-through entity which means you don’t have to file a separate tax return each year for the LLC, the income from the LLC for each member is reported on their individual tax returns.
Obviously, this saves accounting costs versus a corporation, which is not a pass-through entity and which requires two separate tax return filings annually, one for the corporation and one by each shareholder. And while an S-Corporation election can elect pass through entity status, the LLC has that already out of the box.
So for tax purposes, you have the ease of the LLC and the accounting savings.
#5 AN LLC CAN BE WOUND UP AND DISSOLVED VERY EASILY
When an LLC’s purpose has ended, they are very easy to wind up as well. While the membership agreement usually controls, the managing member (or members themselves) has to follow the instructions provided and once done. This process usually involves, to name a few examples, liquidating LLC property, paying creditors, shutting down accounts and correctly publishing notice of the dissolution in compliance with state law and, if applicable the membership agreement.
Missouri limited liability companies are statutorily prescribed under RSMo. Section 347.039. Foreign companies must name a registered agent to handle affairs in the state in which it is doing business. This includes the requirement of registering an agent to handle process and the receipt of documents from the Missouri Secretary of State.