| The corporation is the traditional business entity of | | | | are not. The owners of interest in limited liability |
| choice because it has been around for literally | | | | companies are called members. LLCs cannot be |
| hundreds of years. The limited liability company, better | | | | publicly traded like corporations since there simply are |
| known as the LLC, has been an accepted business | | | | no shares to exchange. |
| entity in a majority of states in the United States for | | | | The LLC is actually a very strange business entity. The |
| just about 20 years. In this article, we take a look at | | | | equivalent of the corporate bylaws is called an |
| the basic differences between the two as a matter of | | | | operating agreement. In many states, none is required! |
| practicality. | | | | The LLC can further be run by all the members in |
| Let's start with the most basic of things - who owns | | | | which case it is called a member managed company |
| each entity? The corporation is a "person" for legal | | | | or by a single person called a manager. There are no |
| purposes. That being said, someone has to own it. This | | | | officers or board members which has caused a ton of |
| ownership is expressed through the purchase of | | | | confusion when it comes time to sign contracts and |
| shares. The shares represent a certain ownership | | | | such. As a result, most states have added legal |
| position in the corporation and afford the owner, | | | | provisions that allow for the LLC to have a President, |
| known as a shareholder, certain rights. Small | | | | Vice-President, Treasurer and so on! |
| corporations may have a few thousand shares held | | | | Finally, the LLC is often marketed on the claim that |
| by a few people while huge publicly traded companies | | | | corporate formalities do not have to be followed when |
| like Google will have millions of shares that are actively | | | | using it. This is generally true, but failing to follow many |
| traded on the NASDAQ stock exchange. | | | | of the formalities is asking for a heap of trouble. |
| A limited liability company handles ownership differently. | | | | Anything important should be put in writing because it |
| There are no shares and, thus, there are no | | | | will create a record of what happened. This means |
| shareholders. Instead, the ownership in a LLC is | | | | minutes should be kept for the company. If this is not |
| expressed as a percentage of the total ownership | | | | done and a dispute among members breaks out, there |
| available. In some states, it is called a unit interest. | | | | is no real way to know who is right. In such disputes, |
| Regardless, this would seem to suggest that the | | | | the only parties that really end up winning are the |
| owners of said interest would be interestholders. They | | | | lawyers. I say that as a lawyer! |