Q: How is a Limited Liability Company (LLC) formed and maintained?

A: An LLC is formed by one or more individuals, as owners. The owners, called “Members”, file Articles of Organization and enter into an Operating Agreement. An LLC must file a biennial report with the Indiana Secretary of State.

Q: How is a Corporation formed and maintained?

A: A Corporation is a separate legal entity. It is formed by filing corporate organization forms and by designating shareholders, each with a specific number of shares. The Corporation also creates a Board of Directors and Officers to oversee the corporate business. Corporations must file tax returns and maintain business bank accounts and records that are separate from personal accounts. Shareholder meeting minutes, board of director meeting minutes, and other corporate records are also necessary.

Q: How is an LLC taxed?

A: Generally, an LLC may choose to have its income taxed as if it were a partnership or a corporation.

Q: How is a Corporation taxed?

A: A corporation may choose to have its income taxed at the Corporation level or at the Shareholder level.

Q: What are the advantages of forming an LLC?

A: The following are key advantages of forming an LLC:

Asset Protection: LLC’s provide limited liability protection to their members, who are not typically personally liable for the business debts and liabilities of the LLC. Creditors of the LLC cannot typically pursue the personal assets (house, savings account, etc.) of the members to pay business debts.

Flexible structure: LLC’s are free to establish any organizational structure agreed upon by the members. LLC’s can be managed by the members or by managers.

Flexibility: An LLC has a flexible management structure. The flexibility evolves from the statute's phrase “unless otherwise provided in the operating agreement”. This allows business owners to create a structure tailored to business owner’s requirements by entering into an Operating Agreement.