| Although Limited Liability Companies (LLCs) are | | | | find that as well as the up front fee for creating the |
| growing in popularity, there is some dispute as to how | | | | LLC you have some sort of franchise or capital values |
| effective and appropriate it is to create one in certain | | | | tax. The calculation of this tax, the frequency with |
| situations. As with any initiative in business, putting | | | | which you must pay it and the name given to it all |
| together an LLC is subject to conditions being | | | | differ from state to state. As a result, there are some |
| appropriate, and if your situation does not meet those | | | | states which make creation of an LLC generally |
| conditions - or the conditions change - then just as with | | | | advantageous, while others do a great deal to |
| any other initiative, it can cease to be the best option. It | | | | discourage it. In Delaware the tax is charged as a flat |
| is therefore worth taking some heed of the potential | | | | fee, while in other states it may be calculated based |
| disadvantages of an LLC, as it is better to be informed | | | | on company profits. In others still, it will be charged |
| beforehand than to receive a crash course after a | | | | based on operating revenue. In general, the Delaware |
| few months of operation. | | | | method is the most advantageous for a successful |
| Of course many people setting up an LLC will do so | | | | company, while the others may give a younger LLC a |
| for the greater borrowing power it gives their | | | | little more space to operate early on without having to |
| company, including the ability to borrow more and the | | | | pay money they can ill afford. |
| preferential rates of repayment. Contrary to what | | | | Additionally, because of the novelty of the LLC |
| some of us may be led to believe however, this is not | | | | operating methods, different states have different |
| guaranteed. Certainly at the outset of an LLC's | | | | approaches to how they treat an LLC. Some will view |
| operations, the lending institution may well consider in | | | | it as an ignored entity and simply view the person or |
| the absence of any financial records for the company | | | | people involved in the LLC as being sole proprietor or |
| in this condition that it is necessary to ask the | | | | general partners. This defeats the entire purpose of |
| members, or the head of the company to personally | | | | setting up an LLC, as liability is not limited. The LLC, |
| guarantee the loan. This automatically cuts off one of | | | | operated correctly, forms a shield for a company's |
| the most appealing aspects of operating as an LLC - | | | | members to operate the business according to their |
| the liability is not limited to any major degree as far as | | | | vision. If the state sees it differently, then it ceases to |
| borrowing is concerned. Shop around for the best deal | | | | have any meaning at all. |
| you can get and actively consider walking away if you | | | | Disclaimer: This article is for informational and |
| cannot get a deal without giving a personal guarantee. | | | | entertainment purposes only, and should not be |
| Depending on the state in which you operate you may | | | | construed as legal advice on any subject matter. |