It can be difficult to decide how to organize a business: Should yours be an LLC, limited partnership, or a Subchapter S Corporation? As many business owners have discovered, a Michigan LLC offers entrepreneurs the ability to create a corporate organization that offers significant financial security and benefits. Michigan LLCs, however, are not without their limitations. The following will review some key things to consider when forming a Michigan LLC.
Advantages of Michigan LLCs
There are a number of reasons why business owners in Michigan decide to create LLCs, such as:
- Michigan law allows LLCs to exist in perpetuity, which helps companies avoid losing their tax status. To take advantage of this perk, some business owners even decide to convert partnerships to LLCs.
- Michigan law has some provisions relating to LLC management practices that can help to prevent conflicts and lawsuits. An LLC’s members are permitted to either manage the business or hire an outside manager to do so.
- Michigan law allows members of an LLC to initiate a legal action against an LLC and its members for any acts that are illegal, fraudulent, or willfully unfair and oppressive. This law protects members of an LLC who hold a minority interest in a business.
Disadvantages of Michigan LLCs
There are a number of limitations and disadvantages that parties realize in creating LLCs, such as:
- While corporations have to potential to exist forever, there are a number of situations, including the death or bankruptcy of a member, which can lead to the dissolution of an LLC. For this reason, there are more resilient business structures than LLCs.
- Business owners who have plans to eventually make a company public or to issue shares to workers are often better off selecting a corporation or other type of business structure.
- Running a partnership is generally less complex and requires less paperwork running an LLC, which can involve complex tax issues.
Speak with an Experienced Corporate Law Attorney
If you are interested in creating a Michigan LLC, the process begins with writing an abstract that details your purpose. To successfully navigate the process and ensure that your business structure is setting you up for success, get help from an experienced attorney. Contact Resnick Law today to schedule your initial free case evaluation.
(image courtesy of Drew Beamer)