Many business owners often misconstrue the legal status of their Limited Liability Company (LLC), particularly single-member LLC owners. It's commonly believed that simply having an LLC automatically designates it as a separate legal entity. However, this assumption overlooks a crucial distinction: according to the IRS, LLCs are NOT INCORPORATED.
Incorporation entails the granting of a charter, which legally recognizes a business as a distinct entity, endowed with its own rights and liabilities. This means that while LLCs offer liability protection, they don't possess the same legal status as incorporated entities.
What Constitutes an LLC?
An LLC is a business structure permitted by state statutes. Its formation involves filing articles of organization with the state's secretary of state office. Those involved in an LLC are referred to as members.
Here's what defines an LLC:
Structure by State Statute: LLCs are recognized and regulated by state law.
Articles of Organization: An LLC is established by submitting articles of organization to the secretary of state office in the relevant state.
Uniqueness of Name: Each LLC must have a distinct name within its state.
What an LLC Isn't:
Contrary to popular belief, an LLC is not incorporated. Consequently, it does not file articles of incorporation.
Understanding these distinctions is vital for grasping the legal status and obligations associated with your LLC.
By comprehending the intricacies of your LLC's legal standing, you can make informed decisions and navigate the complexities of business ownership more effectively.
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