Articles Tagged with limited liability

AdobeStock_279822215-300x200You might be surprised to learn that an ownership interest in an LLC can be governed by securities law. There are certain circumstances in which an ownership interest is a security subject to federal and state securities laws. Even if an exception applies, you still might be required to file an exemption notice with the government. Be sure to consult with a Silicon Valley business lawyer about which securities regulations apply before buying or selling any ownership interest in an LLC.

What is a Security?

A security is a negotiable financial interest with monetary value. Equity securities represent an ownership interest in a business entity (whether it is a corporation, partnership, trust, or LLC). Debt securities are financial instruments that represent money owed, along with repayment terms such as interest and due dates. A debt security can be either secured by collateral or unsecured. If it is secured, it may be subject to various securities regulations.

Limited liability companies, or LLCs, are one of the various types of business entities from which you can choose when forming a company.  Generally speaking, limited liability companies combine the tax advantages and flexibility of a partnership with the liability protections of a corporation, without subjecting small business owners to the onerous reporting requirements and governance rules associated with corporations.  When forming a limited liability company there are many factors to consider and questions to ask.  The Silicon Valley business attorneys at Structure Law Group, LLP have the knowledge and experience to advise entrepreneurs to weigh all options and make the best decisions for the limited liability company now and in the future.

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How Does an LLC Limit Liability?

Like a corporation, a limited liability company is a separate legal and tax entity, meaning that the LLC is separate from the members who manage and operate the business.  And also like a corporation, the LLC, and not the LLC’s owners, will be liable for the LLC’s debts.  For example, if one sues the LLC to recover on an outstanding debt, only the LLC’s assets can be reached.  In other words, an LLC’s members are not personally liable for the LLC’s debts (just like how a corporation’s shareholders are not personally liable for the corporation’s debts).  This is significantly different than a general partnership or sole proprietorship, where the partners or the individual owner, respectively, are personally liable for the debts and obligations of the business.

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