In Georgia, the Limited Liability Company Act sets out the rules and procedures for forming, operating and dissolving a limited liability company. LLCs are unique business entities that use characteristics of corporations as well as sole proprietorships and partnerships. LLCs offer substantial flexibility for the owners (referred to as “members”) in the areas of taxation, management and liability.
Forming an LLC
In Georgia, LLC members must file with the Georgia secretary of state to legally create an LLC. They must draft articles of organization that include the LLC’s name, location where the LLC will operate, and information about the LLC’s registered agent. A registered agent is someone who can accept service of process on behalf of the company. Service of process typically means important court notices like a complaint and summons in the event the LLC gets sued. The LLC’s name must include the phrase “Limited Liability Company” or “LLC.” As of 2010, the filing fee for an LLC in Georgia is $100 as well as a $25 name reservation fee.
Managing an LLC
One benefit to forming an LLC is flexibility in management. LLC members can elect in their articles of organization how they want to manage the company. The members can manage the company themselves or they can hire separate individuals to manage the company. The former is called member-managed and is similar to the management structure of a partnership. The latter is called manager-managed and is typically how a corporation is managed. An LLC in Georgia may dissolve automatically if the members state a specific time in the articles of organization. Otherwise, all members must consent to dissolve the LLC and notify the Georgia secretary of state.
Taxing an LLC
LLC members can also elect how they want the IRS to tax them. They can elect either "flow-through" taxation, like a partnership, or corporate taxation, like a corporation. Corporations get taxed on profits and their shareholders get taxed on whatever income they receive from the corporation. People often refer to this tax structure as “double taxation.” Accordingly, many LLC members elect to get taxed like a partnership where the income and profits from the corporation go on the members’ individual tax returns only.
Liability for an LLC
Another benefit to forming an LLC is that it limits the individual liability of its members. Like a corporation, an LLC is a separate legal entity from the individual members (or shareholders for a corporation). Accordingly, if the LLC gets sued, the plaintiff cannot typically go after the members’ personal assets. In addition, members cannot be held personally liable for the LLC’s debts. However, Georgia courts may find members personally liable in situations involving deceit or fraud.
Please contact a qualified attorney licensed to practice in Georgia or tax professional to find out if forming an LLC in Georgia can meet your business goals and needs. This article should not be construed as legal advice. It is for educational purposes only.