A limited liability company (hereinafter referred to as LLC) is a commercial company with legal personality status. Typically, an LLC's equity consists of the total face value of its shares. One of the key features and benefits of an LLC is the fact that shareholders cannot be held personally responsible for the company's debts or liabilities - only the company's assets themselves are at risk. However, the issue of limited liability also depends on the national legislation of each jurisdiction. In general, an LLC is a corporate structure that combines the simplified taxation of a partnership with the principle of limited liability of a corporation. It can be the perfect solution for an international trading company, provided the jurisdiction is well chosen.
A major difference between a joint-stock company and an LLC is that the latter is always a close company and its shares are not publicly traded. Internationally, another commonly used name for an LLC is a private liability company or simply “Ltd”. This term is widely used in the United Kingdom and some other common-law countries.
Choosing the correct legal structure for your company can be crucial for the purposes of tax planning, profit-sharing and cost reduction. There are some key differences between them, and each has its own benefits and disadvantages depending on the case.
Advantages and disadvantages of a limited liability company
As with any other legal entity, the LLC has its own pros and cons. Depending on the circumstances and your chosen jurisdiction, there may be other peculiarities in addition to those listed below. That is why we suggest that you consult our lawyers prior to initiating the incorporation process.
The main advantages of an LLC are:
Limited liability of the shareholders with respect to creditors
Smaller minimum capital than for a joint-stock company
Flexible structure: it can operate with one or multiple shareholders
Minimal requirements for board and directors; no supervisory body
Flexibility with regard to taxation
Relatively quick and easy incorporation procedure
Simple bookkeeping and paperwork
Usually one person can be shareholder, director and employee (if required)
The primary disadvantages are:
Limited third-party investment options
The company cannot issue shares publicly
Partner in a limited liability company
The capital shares of a company belong to its shareholders. This means that each shareholder has a say in decision-making according to the number of shares they hold, which in turn depends on how much they have contributed to the company's capital. The number of shares held by an individual shareholder is usually given as a percentage; For example, in an LLC with four shareholders who have invested equally in the company, each owner would typically have a 25% interest, and those four shareholders would each receive a corresponding share of the profits. The liability of shareholders is limited to the amount of capital they have invested.
Usually there is no limit to the total number of shareholders that a limited liability company can have and therefore the shareholders of an LLC can be an individual, a group of two or more persons or even one of several legal entities, for example corporations or other companies. As a result, LLCs are widely recognized as one of the most flexible forms of business and can be used as part of a larger corporate structure. However, some jurisdictions may impose restrictions or additional requirements in relation to Shareholders and their legal status. For example, in some countries an LLC must have at least one shareholder who is a national of that country, while in others a legal entity cannot be a shareholder. Call us now for more information on the legal requirements in your jurisdiction.