Understanding the terminology associated with Limited Liability Companies (LLCs) is essential for anyone involved in forming or managing one. Here’s a comprehensive glossary to guide you through the common terms and their meanings in the world of LLCs.
1. Articles of Organization:
The legal document filed with the state to officially create an LLC. It outlines the basic structure and purpose of the LLC.
An owner of an LLC. Members have ownership interests in the company and typically participate in its management and decision-making.
3. Operating Agreement:
A legal document outlining the ownership structure, management roles, and operating procedures of an LLC.
4. Limited Liability:
The legal protection that limits the personal liability of the members to the amount of their investment in the LLC.
5. Registered Agent:
An individual or entity designated to receive legal documents and official correspondence on behalf of the LLC.
6. EIN (Employer Identification Number):
A unique nine-digit number issued by the IRS for tax identification purposes. It’s similar to a social security number but for the LLC.
7. Member-Managed LLC:
An LLC where all members participate in the day-to-day operations and decision-making of the company.
8. Manager-Managed LLC:
An LLC where members appoint a manager or managers to handle the daily operations and decision-making on their behalf.
The formal closing or termination of an LLC’s operations and legal existence.
10. Capital Contribution:
The amount of money, property, or services a member invests in the LLC in exchange for ownership interest.
11. Residual Profits:
Profits remaining after all expenses, debts, and distributions have been accounted for. These are typically distributed among the members based on their ownership percentages.
The process of changing the legal structure of a business, such as converting from a sole proprietorship or partnership to an LLC.
13. Resident Agent:
A term sometimes used instead of “registered agent.” It refers to the individual or entity that accepts legal documents and official mail on behalf of the LLC.
14. Series LLC:
An LLC structure that allows for the creation of separate “series” with distinct assets, members, and rights. Each series operates as a separate entity with limited liability.
15. Good Standing:
The status of an LLC indicating that it is compliant with all state requirements and is authorized to conduct business.
This glossary serves as a valuable reference to assist you in navigating the terminology associated with LLCs. Understanding these terms will empower you in your journey of forming, managing, and thriving with your LLC.
In this comprehensive glossary, we’ve defined and explained key terms related to LLCs to enhance your understanding of this business structure. The aim is to provide you with a clear and gentle guide to the terminology associated with LLCs. Here’s to your continued knowledge and success with LLCs!