A limited liability company (LLC) a single-member or multiple-member business that limits the personal liability of its owners. Business owners organize their businesses as LLCs to protect themselves and their personal possessions from the company’s legal debts and obligations.
Two types of LLCs exist: standard LLCs; and professional LLCs. A standard LLC is made up of one or more owners called members. A professional LLC consists of one or more members with a license to provide a professional service, such as doctors and lawyers. An organizer is the individual who with the authority form the LLC.
State law has several requires to form a LLC in Kentucky:
- You must pick a name for the business that is not already registered with Kentucky Secretary of State;
- You must file Articles of Organization with the Kentucky Secretary of State;
- You must choose an agent for service of process (receiving legal notice on behalf of the LLC) who is a resident of Kentucky; and
- Your business office must have a Kentucky street address.
Kentucky law provides rules for naming your LLC. It must contain the following words or abbreviations:
- Limited company
- Limited liability company
- LC; or
If you want to abbreviate “limited liability company” you must use the abbreviation “LTD CO.”
The Articles of Organization (articles) is the application you complete and sign to for your LLC. You can download the application for the articles from the Kentucky Secretary of State business filing forms webpage. You can mail the application to the Office of the Secretary of State of file it electronically on its website.
The articles must state the following information:
- The name of the company;
- The name of the Kentucky resident agent for service of process on behalf of the LLC;
- The Kentucky street address of the resident agent’s business office;
- The business mailing address, which can be in or out of the state, to receive correspondence from the Office of the Secretary of State
- The date the business officially becomes an LLC, which can begin at filing or a delayed date;
- A statement determining whether the members or the managers handle the management of the LLC;
- If it is a professional LLC, you must state the professional services the LLC provides; and
- The signature of the organizer)
A manager is an agent of the LLC hires or chooses to run the LLC. The manager may or may not be one of the LLC members. The members may hire a manager so they do not have to deal with the day-to-day operations and decisions of the LLC.
Members of limited liability companies enjoy protection for the debts, obligation and liabilities of the business. The members own and manage the LLC without having their personal assets in danger due the faults of company. The members are separate from the LLC; therefore, the LLC itself is responsible for the actions of the business.
LLCs with more than one member have the option to decide how to distribute the business profits. A multiple-member LLC may distribute the profits equally among the member, or the members may agree to have one or more member receive higher shares of the profits
Unlike corporations, LLCs do have to have meetings or keep formal minutes. An LLC may agree to have an initial meeting to discuss the function and operation of the business, but Kansas law does not require continuous meetings.
LLCs pass their federal and state income taxes obligations to the individual members. The members pay the LLC profits, losses, and expenses taxes on their personal tax returns in the amount of their ownership shares.
Generally, members enjoy the benefit of limited liability protection from the actions and obligations involving the LLC. However, if you do anything on behalf of the LLC without the authority or permission to do so, you are liable for any debts or legal claims that result from your actions. You are also responsible for any liabilities that occur because of your own negligence, wrongful acts, or misconduct.
A creditor may go to court and get a charging order against a member of an LLC who owes him money or other debt. The charging order is a lien against the debtor member that gives the creditor the right to get the member’s financial share from the LLC to satisfy the debt.. The debtor member is still responsible for his share of the LLC income taxes. The charging order does not give the creditor the right to manage the business, but it may delay the other members from receiving their profits until after the creditor receives his money.
If you need help forming your LLC, then contact a local Kentucky business lawyer and get the help you need today.