L.L.C.

Riding around the neighborhood I noticed something new on all the white trucks parked in front of all the house doing everything from plumbing installation to air conditioning repair to tree trimming or lawn maintenance, there is this L.L.C. attached to the name now.

What does L.L.C. mean?

A limited liability company (LLC) is a corporate structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

So when did this become a trend? It makes sense that an entrepreneur who begs investors through kickstart a company only for it to fail should not personally become bankrupt.

A limited liability company (LLC) is the US-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under state law; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a Professional Limited Liability Company (PLLC).

A limited liability company (LLC) is a hybrid legal entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC is a type of unincorporated association distinct from a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. As a business entity, a LLC is often more flexible than a corporation and may be well suited for companies with a single owner.

Although LLCs and corporations both possess some analogous features, the basic terminology commonly associated with each type of legal entity, at least within the United States, is sometimes different. When an LLC is formed, it is said to be “organized,” not “incorporated” or “chartered,” and its founding document is likewise known as its "articles of organization," instead of its “articles of incorporation” or its “corporate charter.” Internal operations of an LLC are further governed by its “operating agreement,” rather than its “bylaws.” The owner of beneficial rights in an LLC is known as a “member,” rather than a “shareholder.” Additionally, ownership in an LLC is represented by a “membership interest” or an “LLC interest” (sometimes measured in “membership units” or just “units” and at other times simply stated only as percentages), rather than represented by “shares of stock” or just “shares” (with ownership measured by the number of shares held by each shareholder). Similarly, when issued in physical rather than electronic form, a document evidencing ownership rights in an LLC is called a “membership certificate” rather than a “stock certificate”.

In the absence of express statutory guidance, most American courts have held that LLC members are subject to the same common law alter ego piercing theories as corporate shareholders. However, it is more difficult to pierce the LLC veil because LLCs do not have many formalities to maintain. As long as the LLC and the members do not commingle funds, it is difficult to pierce the LLC veil. Membership interests in LLCs and partnership interests are also afforded a significant level of protection through the charging order mechanism. The charging order limits the creditor of a debtor-partner or a debtor-member to the debtor’s share of distributions, without conferring on the creditor any voting or management rights.

Limited liability company members may, in certain circumstances, also incur a personal liability in cases where distributions to members render the LLC insolvent.

OK, take a moment and lets think about this.

 So your neighbor (for this example we’ll call him ‘Bubba’) works on his car in the front yard every Saturday. He seems to be fairly good at it and has even offered some tips for your car.

Now Bubba wants to start a business working on other people’s cars for money. The American Dream comes true.

Bubba does all the right things, getting licenses and permits and sets up shop and even hires an assistant. He puts an ad in the local newspaper and people start rolling in. Bubba seems to be doing well.

Then one day a customer drives back complaining about his thing-a-ma-bob ain’t working and Bubba needs to fix it, at no charge.

Well Bubba did work on the car and did cash the payment for the repair but how was he liable? What happened to this car when it drove off the lot? Did the customer or one of his friends decide to ‘tinker’ with the engine until it decided not to work anymore? Did Bubba miss something? Were the parts he ordered not of the quality guaranteed?

What is Bubba to do?

Fix the who-ga-mo-bob-its at no charge? Should he offer up another bill to an irate customer?

If the customer isn’t happy, word of mouth (which means Yelp! And every other social media) will be bombarded with perceived Bubba’s incompetence. Or the customer could hire a lawyer stating Bubba was liable for his motor machine inconsistencies after the aforementioned repair job.

In the meantime, Bubba’s reputation could be tarnished to the point where he is losing customers, laying off staff, and finally putting the business on the block. So long to Bubba’s big dream…but wait.

The lawyers are not satisfied. They go after Bubba’s personal assets.

So this L.L.C. seems to be a posting like ‘No Trespassing’ or ‘Post No Bills’ so the contractor or builder or plumber might survive a loose fitting or a misnomer in instructions that may become unknowing disastrous results.

At some point an agreement was a handshake and paid when the job was complete. If the customer wasn’t completely satisfied, all items were set right before payment.

Then a check was cut to cover the cost of labor, time and materials as agreed upon estimate.

Was that personal check good?

The idea of handing over a pile of cash is so old school, but are we ready to hand over our phones to a stranger who just unplugged our toilet?

Will the nail bind the boards? Will the bullet shoot straight? Will the cupboard doors that were manufactured on the other side of the world and shipped over the ocean in metal boxes splashed about with seawater then unloaded and driven across miles to be unloaded yet again to a loading dock’s warehouse to suffer moisture and abuse only to be delivered to your house and applied to the wall with tin metal screws from recycled materials by illegal immigrant workers earning less than minimum wage?

Who is liable?