LLC is short for “limited liability company”. LLCs are a type of business structure that allows an organization to receive the tax advantage benefits associated with a partnership along with the limited liability characteristics of a corporation. The LLC business model is usually a great choice for small to mid-size companies.
LLCs are owned by “members” and when there are multiple members of an LLC those members owe one another certain duties. For example, members cannot close the books and records of the LLC from other members. Each member should have access to information about the LLC, such as the LLC’s financial records.
LLCs are also required to file annual reports with Tennessee and may be subject to other regulations depending on the type of business the LLC conducts. For example, a bar would also be subject to the rules and regulations of Tennessee alcohol laws.
In Tennessee, all required paperwork must be filed with the Tennessee Secretary of States’ Business Services. A LLC will be required to file an annual report with state. Among other things, the annual report helps the state ensure that appropriate taxes are paid.
Where a LLC has multiple members, that LLC will want to have a well written and appropriate operating agreement. The operating agreement should outline all of the rights and responsibilities of each of the members. Many legal issues will be settled by reviewing the terms of the operating agreement. It is important to have a lawyer review your LLC’s operating agreement to ensure that it is properly tailored to the LLC’s business model and the laws of Tennessee.
A LLC formed in Tennessee has the following advantages:
- owners have limited personal liability for the debts and actions of the LLC, and
- pass-through taxation.
Members should be aware that they can lose their LLC limited personal liability status if they use the LLC in a manner that violates Tennessee law. LLCs are not meant to simply shield individuals from personal liability for things that fall outside of a business scope.
LLC’s do have drawbacks. For example, when compared with the partnership or sole proprietorship business models, LLCs are difficult to form and manage. There can be considerable paperwork and there are ongoing reporting requirements.
Contact a local Tennessee business lawyer today to discuss any legal issues your LLC is facing. An experienced lawyer can guide you through the complexities of corporate formation and management.