Overview:
An unincorporated association having one or more members.

An LLC can be managed by managers or members. Managers can be compared to the board of directors, and members to shareholders of a corporation. The internal affairs of the LLC are governed by operating agreements.

Managers can be but are not required to be members. It must be stated in the articles of organization if the limited liability company is to be managed by managers. Managers could be compared to the board of directors, and members are like the shareholders of a corporation or limited partners of a limited partnership. In order to be a member of a limited liability company, a contribution such as cash, property, or services rendered must be made.

The internal affairs of the LLC are governed by operating agreements that may be oral or written. These operating agreements are comparable to the by-lays of a corporation. The internal affairs are managed by the members, unless the articles of organization specifically state that they shall be managed by one or more managers.

A limited liability company must have a registered agent in Oregon whose street address is th registered office. When a limited liability company is sued, the legal papers are served on the registered agent. Thus, it is necessary that the registered office have a street address. A registered agent can be an individual or a legal entity.

An LLC combines selected corporate and partnership characteristics while still maintaining status as a legal entity distinct from its owners. As a separate entity, it can acquire assets, incur liabilities and conduct business. As the name implies, however, it provides limited liability for owners. LLC owners risk only their investment. Personal assets are not at risk.

LLC owners are provided the protection against liabilities that is common to corporate shareholders with a pass through tax treatment that is common to partnerships.

Even though LLCs are treated as partnerships for tax purposes, the owners of an LLC do not have personal liability for obligation of the LLC. In this respect, LLC members have the same protections as corporate shareholders. In states that allow them, single member LLCs have the same liability protection as multi-member LLCs.

LLCs are formed under specific states limited liability company acts. LLC acts now exist in all 50 states and the District of Columbia.

The governing documents for an LLC are its articles of organization as filed with the Secretary of State's office and its operating agreement. The articles of organization (or certificate of formation in some states) are comparable to the articles of incorportion for a corporation and typically set forht only minimal information such as names and addresses. However, an LLC's articles of organization also provide one additional item: the items specify whether the LLC is a member managed or manager managed company. An operating agreement (in some states referred to as a limited liability company agreement) is analogous to the partnership agreement of a general partnership. It sets forth the terms agreed on by the members with respect to capital contributions, profit and loss sharing arrangements, management structure, buy and sell provisions, and provisions governing the ultimate dissolution of the LLC.

The owners of an LLC are referred to as its members. In most states, an LLC can have one or more members. In a few states, LLCs must have at least two members. In a member managed LLC, the members also carry on the management of the LLC and each member shares equally in such management authority. A manager of a manager managed LLC usually is, but is not required to be, a member of the LLC.

Management Authority:
Apparent Authority: In a member managed LLC, all members have apparent authority for transactions in the ordinary course of the LCC's business. In a manager managed LLC, only the managers have apparent authority for transactions in the ordinary course of business.

Actual Authority: For transactions that are not in the ordinary course of the LLC's business, approval of all or a majority of the managers is required if the LLC is a manager managed LLC, or the members if a member managed LLC. The procedures and degree of approval required will be spelled out in the LLC's operating agreement.

Major Decisions: The extent to which certain major decisions (such as a merger or a sale of substantially all the assets) require approval of merely the manager or a specified proportion of the members can only be determined by reviewing the articles of organization and operating agreement for an LLC.

Principal Tax Characteristics: Virtually all domestic LLCs with two or more members are treated as partnerships for federal income tax purposes. Thus multi-member LLCs have the same tax purposes. Thus an LLC with a single individual member will be treated as a sole proprietorship for income tax purposes. Similarly, an LLC with a single corporation (or other entity) as its only member will be treated as an incorporated division for income tax purposes.

Advantages and Disadvantages for Real Estate Investments: LLCs represent the most suitable form of organization for holding real estate. The pass through partnership treatment of LLCs avoids all possiblity of a double tax. LLC members are allowed to include LLC liabilities in their basis and thus are beter able to deduct any depreciation or other tax losses associated with the real estate investment. Distributions of real property by an LLC to its members are generally not taxable. This can be very useful in dividing various real estate assets among members of an LLC.

Compensation: An LLC profits-only interest can be used to compensate a manager or other member providing services to the LLC without resulting in current taxation to the manager or member providing the services. This provides a distinct advantage over corporations where using stock to compensate an employee will result in current taxable income for the employee.

Liability: No members of an LLC have personal liability for the LLC's obligations. Unlike limited partnerships, there is no requirement for a general partner and , unlike limited partnerships, LLC members who participate in management are not subjected to personal liability.

This material was provided by Paula Person. You may contact Paula at [email protected]

Limited liability companies organized under Oregon statute are "domestic" limited liability companies. Those formed under the laws of other states, but transacting business in Oregon, are "foreign" limited liability companies.

Domestic Limited Liability Company
To form a domestic limited liability company in Oregon, articles of organization and a non-refundable $50 processing fee must be submitted to Business Registry. Before articles of organization are filed, the name is checked for availability. The name must be distinguishable from other active names on Business Registry records. In addition, the name of the limited liability company must contain the words "limited liability company" or the abbreviation "L.L.C." or "LLC". If the name is distinguishable and the articles conform to Oregon statute, Business Registry processes the document and returns an acknowledgment to the customer.

Foreign Limited Liability Company
A foreign limited liability company must obtain authority to transact business in Oregon. An application of authority, including the name and address of its Oregon registered agent and a non-refundable $50 processing fee must be submitted to Business Registry. A certificate of existence or similar document from the jurisdiction of organization must be submitted with the application form. The certificate or similar document must be dated within 60 days of the date of the application. Before an application of authority is filed, the name is checked for availability. The name must be distinguishable from other active names on Business Registry records. If the name is distinguishable and the application conforms to Oregon statute, Business Registry processes the document and returns an acknowledgment to the customer.

Domestic and foreign limited liability companies are regulated by the Oregon Limited Liability Company Act, ORS Chapter 63. To obtain available forms.

Sale of Securities Blue sky laws

Annual Report:
Annual Reporting requirements.

Additional resources on this topic:
http://www.businesslaw.gov	http://www.oregon.gov	http://www.filinginoregon.com

Resources	Getting Started	Protecting Your Assets	Marketing and Sales
Pricing and Proposals	Tax Ideas	Money Matters	The SBR Homepage

We welcome comments and encourage ideas about how we can improve the usefulness of our website. So drop a line to Jerry, webmaster, and let us know what you're thinking.

This website was created by gloWerks, Inc. in collaboration with The Small Business Roundtable.