If you are considering starting your own business in Georgia, you may be wondering about the different legal structures for businesses.  Limited liability corporations have become some of the most popular legal structures for Georgia businesses. A limited liability company (LLC) is a legal business entity that provides the owners with liability protection but functions as a partnership.

Limited Liability Corporations are also relatively easy to establish and maintain, making them a popular choice for business owners. In an LLC, the owners of the business are called “members.” LLCs can have several different types of owners, including some other business types. We will discuss who can be a member of an LLC below.

The Owners of LLC are Called Members

Under Georgia law, the owners of an LLC are referred to as members. An LLC is formed when the owners register the LLC with Georgia by filing particles or organization or a similar document. In Georgia, LLCs are unique business entities that use characteristics of corporations and sole proprietorships and partnerships. LLCs offer owners substantial flexibility in the areas of management, taxation, and liability.

LLC Membership Requirements

There are two different types of LLC membership for tax purposes. The type of membership depends on the number of members. A single-member LLC has one owner, and a multiple-member LLC has several owners. States do not distinguish between these two types when registering an LLC. They are only relevant when it comes time for the LLC to file an income tax return. In a multiple-owner LLC, nearly any organization can be a member, including corporations, other LLCs for entities, trusts, and pension plans.

You may be wondering how a corporation can become a member of an LLC. One company can choose to buy another company and retain that company’s previous legal entity form. When another business owns an LLC, it is typically set up as a subsidiary of a parent company, usually a corporation. The parent company will own and control the subsidiary (LLC). The parent corporation can hold several LLCs for different purposes. For example, a corporation may own several LLCs, each for a different real estate property that the company owns and manages. Doing so can separate the liability of one property from the liability of another property.

Single-Member vs. Double-Member LLCs

A single-member LLC can be owned by a partnership or corporation or a foreign liability company. Foreign liability companies are those companies formed in a state outside of Georgia that may have different qualifications for LLC membership. There is usually an exception for professional LLCs, which are restricted on the types of owners the LLC can have.

Only certain licensed professionals, such as accountants, attorneys, and doctors, can form professional LLCs. States have different rules depending on the types of professionals they allow as LLC members. Some states do not even enable professional LLCs. In states that allow professional LLCs, the members need to be identified, and their professional licenses need to be approved when the company is formed.

The LLC Structure Provides Members With Flexibility

One reason why many people prefer to create an LLC involves the flexibility it gives them. LLC members can choose how they would like the IRS to tax them. They have the right to choose pass-through taxation, as with a partnership. They can also choose corporate taxation.

If they choose the corporate taxation model, they will be taxed on profits, and their shareholders will be taxed on whatever income they receive from the corporation. Sometimes people call this structure “double taxation.” For that reason, many LLC members choose to be taxed as a partnership. The income in profits from the LLC will pass through to the member’s individual tax returns so that the taxes are only paid once.

Liability Protection Through a Georgia LLC

Another benefit to forming an LLC in Georgia is that it limits the individual liability of the members. As with corporations, an LLC is a separate legal entity from the individual members. If the LLC is sued, the plaintiff in the lawsuit will typically not go after the members’ personal assets. Additionally, creditors cannot hold LLC members personally liable for the LLC’s debts in most cases. However, Georgia courts can find LLC members personally liable in situations that involve fraud or deceit.

How Do Owners Manage the LLCs?

Management of LLCs is similar to other types of companies. As with any other kind of business, someone will need to manage the LLC’s day-to-day activities. Someone also needs to be making long-term decisions for the LLC. Most of the time, LLC members choose to manage the LLC themselves. They may decide to designate or hire a manager or managers. The management of the LLC is typically spelled out in the application with the state of Georgia. It should also be spelled out in the operating agreement.

The operating agreement should state who has the administrative responsibilities for the finances and general operations of the LLC. It should also state who has a general liability, not limited liability, for the actions and administrative decisions of the LLC. When LLC members decide to manage the LLC themselves, they can set up the management however they want. There is no formal board of directors structure required, but it is good for the LLC members to meet formally at least once a year. They should also keep records of all the decisions they make in their meetings in case liability does come into question.

Need Help Setting Up an LLC? InPrime Legal Can Help

Taking the time to set up an LLC can help her text you personally and your business. If you have questions about setting up an LLC or multiple LLC in Georgia, contact InPrime Legal today to learn more about our legal services.