New York entrepreneurs and startup managers find no limitations on choices when it comes to the type of entity they choose for their new organization.
Frankly, there are tons of options, ranging from corporate form to sole proprietorship. Note, “Choosing the right business entity and organizational structure is the key to getting your business off to a good start.”
On our website we confirm that Limited liability companies are emerging as preferred formation options for many business firms.
Why is a limited liability company often the preferred entity option
Limited liability partnerships are common business vehicles for a number of reasons, including:
- Ownership is generally restricted to a small group of participants, allowing for flexible administration
- Legal incorporation is a relatively simple process
- Partners are protected from personal liability towards the LLC
- ‘Pass-by’ tax treatment for members avoids double taxation
The main role the operating agreement plays in a LLC
Carefully formulating and implementing an operating agreement is a key issue for LLC participants. An online overview of this contract states that it “governs the internal operations of the business in a way that suits the specific needs of the business owners”.
This introductory book also emphasizes these two key points: Personal liability protection can be at risk in the absence of contract execution formalities, and state rules / procedures will intervene to control the LCC if there is no operating agreement to manage the process.
Operating agreements can be designed admirably and address wide-ranging issues Ranging from voting rights, partners’ duties, ownership ratios to fulfill details, profit / loss distribution, and more.