Baldwin & Briscoe P.C.
301-862-4400
22335 Exploration Drive Ste. 2030
Lexington Park, MD 20653
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Is Doing Business as an LLC the Right Option for You?

 

What is an LLC?

              An LLC is an acronym for “limited liability company”.  In Maryland as well as other states, it is a type of business that allows the owners, who are called “members” to shield their personal assets against liability for business debts.  Members of the LLC are not personally obligated for debts or liabilities incurred by the LLC solely by reason that they are members of the LLC.

 How is an LLC formed?

              LLCs are formed by filing Articles of Organization with the Maryland Department of Assessment and Taxation.  The Articles of Organization spell out the basic information need by the State of Maryland to form an LLC.

 What is an LLC Operating Agreement?

              An LLC Operating Agreement is the basic governing documents for an LLC.  It spells out the specific terms under which the LLC can add or remove members, hire or fire managers, raise new capital for operations and make decisions about the way that the LLC is managed.  It establishes the rights and responsibilities of each member of the LLC.

              An LLC Operating Agreement is helpful to avoid disputes over how the LLC is governed.  In it the members can specify how important decisions will be made and how profits or losses will be distributed.  An operating agreement can be helpful when a member desires to withdraw from the LLC or the LLC wishes to admit a new member.

              An LLC’s Operating Agreement can be amended by unanimous consent of the members or as otherwise provided in the Operating Agreement.

 What is a Member?

               A member is a person that has an ownership interest in an LLC.  A member must make some capital contribution to the LLC.  Members can be natural persons or business entities, such as another LLC or a Corporation.

 Does an LLC have stock?

              LLC members do not own shares of stock in an LLC.  Members hold a membership interest which is generally expressed on a percentage basis.  Membership interests are apportioned based on the members’ capital contributions to the LLC.

 How is an LLC managed?

              An LLC may be managed by its members or the members may appoint one or more managers to manage the day-to-day operations of the LLC.

 Is an LLC like a partnership?

              An LLC is similar to a partnership in that there is joint decision making and profits and losses area shared among various owners. 

              An LLC is similar to a partnership in that it provides for “flow through” taxation of profits and losses. 

              An LLC is different from a partnership in that an LLC’s members are not individually liable for the LLC’s obligations solely by reason of their membership in the LLC.

What are the benefits of forming an LLC?

              An LLC allows small businesses to take advantage of the limited-liability protection that is afforded to corporations while maintaining the simplicity of a sole proprietorship.

              An LLC limits the liability of the members to their capital contributions.  Further, unlike in a partnership, LLC members do not lose their limited liability by actively participating in the membership of the company.

 What are the tax implications of an LLC?

              An LLC can elect to be treated as an S-Corporation for tax purposes, but maintain the simplicity f a sole proprietorship.  This allows the LLC to avoid some of the tax complications that apply to S-Corporations.  For example, an LLC can have more than 100 members (shareholders); an LLC can have foreign owners; can have members that are corporations, partnerships, trusts, or other LLCs; they can derive significant portions of their income from passive sources; they can issue more than one class of ownership (stock).  An S-corp may be disqualified for doing these things.  LLC’s also provide certain tax benefits to their members allowing them to take tax losses under technical rules having to do with “tax basis.”

 What are the drawbacks of forming an LLC?

              Maryland LLCs are a relatively new type of business formation.  This means that they are somewhat untested in the courts. Other states, such as Delaware, have a longer and more established history with LLCs.

              Single members LLCs are generally disregarded as taxable entitles.  While this is a good thing, one important consideration is that the owner of a single members LLC is liable to the IRS for the employer’s share of federal payroll taxes with the LLC is a disregarded entity. 

              An LLC is not suited to companies that will need to raise venture capital or seek to be publicly traded.

              The attorneys at Baldwin, Briscoe & Steinmetz can help you determine whether organizing your business as a limited liability company is a smart move.  If so, we can also create the proper legal structure for your business.  Contact us today for an appointment. 

 

The information contained on this page is provided as general information and does not constitute legal advice.  The experienced attorneys at Baldwin, Briscoe & Steinmetz, P.C. can assist you if you have questions concerning a contract, including verbal contracts.  We’d be happy to sit down with you and review your situation and provide appropriate advice. 

 

The Law Offices of Baldwin, Briscoe & Steinmetz, P.C. also offers these services:

Bankruptcy and ForeclosureBusiness LawCivil LitigationCriminal DefenseEmployment, Disability, and Consumer RightsFamily LawGovernment Contracts LawIntellectual Property, Personal InjuryReal Estate, Social Security Disability & Workers’ Compensation and Wills, Trusts, & Estates

 

 

Contact Us

The Law Offices of Baldwin, Briscoe & Steinmetz, P.C.

22335 Exploration Drive

Suite 2030

Lexington Park, MD 20653

301-862-4400 Phone

301-862-3009 Fax

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Our Attorneys

Samuel C.P. Baldwin, Jr., Esq.

Janice Briscoe, Esq.

Richard J. Steinmetz Jr., Esq.

David J. Hebb, Esq.

Sandra Kaufman Jonasen, Esq.


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With an office conveniently located in Lexington Park, The Law Offices of Baldwin, Briscoe & Stienmetz, P.C. serves clients in the counties and cities of Lexington Park, Leonardtown, Hollywood, Mechanicsville, Loveville, Helen, Breton Bay, Chaptico, Charlotte Hall, Golden Beach, Avenue, La Plata, Waldorf, Newburg, Port Tobacco, Port Charles, Solomons Island, Prince Frederick, Chesapeake Shores, Hughesville, Benedict, Nanjemoy, Lusby, Port Republic, St. Mary's County, Charles County, Calvert County, Prince George's County, Southern Maryland.


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