What is a Limited Liability Company (LLC)?

A Limited Liability Company is a business entity that combines aspects of a corporation and a partnership. The owners of an LLC are called “members”, and state law prescribes that any number of people might constitute the ownership of a LLC. The majority of LLCs, however, consist of one to three members.  As of 2012, about 40,000 LLCs are doing business in the state of NH.

To form a new LLC, the members must register a company title with the NH Secretary of State.  A filing fee accompanies the formation of a new LLC.  Limited Liability Companies must attach the initials LLC to their business name in any formal documentation.  NH law doesn’t require the registration of an operating agreement, but it may be to your advantage to draw one up; an operating agreement lays out   distribution of responsibilities within the company, protocols for profit sharing, and various other administrative arrangements.  This agreement is legally binding, although in NH even an oral arrangement has legal status, thus lowering the financial burden of hiring legal counsel to manage an array of paperwork.  If your company can afford it, however, it is wiser to retain an attorney to supervise any contractual agreements that will have to stand up in court.

LLCs insulate members from personal liability for debts and litigation facing the company.  The business has an independent legal and financial status.  The federal government, moreover, doesn’t subject LLCs to taxation.  Instead, individual members list profits and losses on their personal tax returns in the manner of a business partnership.  The state of NH, however, does levy business taxes on LLCs.

A potential disadvantage to setting up your business as an LLC comes from the fact that the departure of any member requires the formal dissolution of the company.  The remaining members may choose to form another LLC, but this involves costs and hassles.  In addition, members are not immune from all liability.  Misconduct or criminal activity on the part of employees might impact members directly; you should consult your state’s laws to determine the scope of liability in the event that another member or employee engages in criminal activity. 

You should retain a business attorney to help you determine the appropriate structure for your fledgling organization.  For legal and taxation purposes, an LLC has advantages over a corporation, but a partnership may be more appropriate for smaller companies with fewer employees.

Articles contained here are not intended to provide legal advice, only providing general information. We encourage individuals to consult with an attorney regarding individual circumstances.