The concept and general characteristics of an LLC: features and definition

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Before every novice entrepreneur, the question arises of which organizational form to choose to start a business, and often the choice falls on a legal entity. To do this, you can choose different options for companies, but LLC is most often opened. Beforehand, each characteristic of an LLC is carefully studied, which makes it possible to assess the feasibility of forming a company in connection with the chosen direction of work.

LLC Concept

A limited liability company (LLC) is a business company that can be opened by one entrepreneur or several persons. The authorized capital of the organization is divided into a certain number of parts, depending on the number of founders.

The organizational and economic characteristics of an LLC consist of several features:

• before opening a company, a charter is formed;
• authorized capital is required, the minimum amount of which for a standard company that does not need a license to operate is 10 thousand rubles;
• all founders are notare liable for the debts of the company with their personal property, therefore, when the company is declared bankrupt, only the assets of the organization are sold;
• along with individual entrepreneurs, an enterprise can use simplified regimes for calculating and paying taxes.

The above brief description of the LLC allows you to understand the main features of the work of such a company. It should be studied by every potential founder.

The main goal of an LLC is to make a profit, so a commercial organization is always opened. The firm can engage in any type of activity that is permitted in the Russian Federation, but some areas require a license or other types of permits.

This type of organizational form has certain features that should be studied in advance by every entrepreneur. It is advisable to compare the features of IP and LLC in advance in order to determine the profitability of opening a company.

After studying the concept and main characteristics of an LLC, every entrepreneur or group of people who want to open their own business will be able to start working taking into account numerous nuances.

Availability of legal entity features

LLC is a kind of legal entity, so the company is distinguished by organizational unity, and there are property rights for all property used during work. Companies are self-responsible and, in cooperation with other organizations or government agencies, act on their own behalf.

Unlike individual entrepreneurs, companies bear more serious responsibility for various offenses, but their founders do notresponsible for debts with personal property.

Place of registration

This characteristic of the LLC organization is the choice of office, shop or industrial premises for work. You can choose not only commercial real estate, but even an apartment located in a residential building. In the latter case, you need to re-register the object.

No documents are required confirming that the selected premises are the property of the company. It is allowed to draw up a lease agreement with the owner of the object, after which this address is indicated when registering the organization.

Use important attributes

This characteristic of LLC is the need to use specific elements while working. These include:

• organization seal;
• brand name;
• bank account required for settlements with counterparties and payment of taxes and fees;
• the presence of letterheads on which various orders or other significant acts are drawn up;
• statutory documentation containing basic information about the rules and directions of the company.

Based on Federal Law No. 82 since 2015, LLCs may not use the seal during their activities, but usually companies need it to work with different counterparties.

Preferential right to purchase shares

This organizational characteristic of an LLC is that if one of the founders decides to sell his share, he initially offers it to other members of the company. This is due to their preemptive right to purchase.

A share is offered at the same price at which it will be sold to third parties if other company executives are not interested in it. The transaction is necessarily concluded through the execution of a contract of sale. This document is notarized.

The founder leaving the LLC receives a compensation payment equal to the value of his share in the authorized capital.

The need to report on the results of activities to the tax office

This characteristic is similar to the features of other organizational forms of companies. It assumes that the company is obliged to perform certain actions before the Federal Tax Service:

• selection of the taxation regime, and the LLC can focus not only on the general system, but even on the simplified tax system, subject to certain requirements;
• accounting if BASIC is selected;
• annual, quarterly or monthly performance reporting;
• compliance with cash discipline;
• transfer taxes on profits or income.

If tax fees are incorrectly calculated, they are transferred late or reports are not submitted, then this is the basis for the accrual of significant fines by the Federal Tax Service. For the company, they are really significant, therefore, from the first days of opening, it is required to invite a professional and experienced accountant to the staff.

Number of participants

Even one person can open a company, but if the number of founders exceeds 50, then in a short period of time the company must be transformed into an OJSC, and it is also allowed to choose a production cooperative.

This characteristic of an LLC is strictly controlled by the employees of the Federal Tax Service, so if the number of participants exceeds the maximum limit, while the company continues to engage in its core business, this becomes the reason for the accrual of fines. Other measures may also be applied, consisting in the suspension of activities or forced transformation.

Standardly, each member can easily leave the society, but some restrictions may be prescribed in the charter.

Possibility of opening branches or representative offices

This characteristic of an LLC is especially important for large companies. They have the ability to open their branches in different cities, and each representative office has its own current account and reports to the Federal Tax Service for its work independently.

In this case, it is necessary to focus on the articles of the Federal Law No. 14. Representative offices are opened only after the meeting of the founders, where the corresponding voting is held. Due to the formation of branches, the scope of the organization's activities increases. They can be opened not only in the cities of Russia, but also in other states. In the latter case, the work of the representative office must be carried out according to the laws of another country.

Onaffiliates are subject to all licenses obtained by the company itself. Representative offices are not full-fledged legal entities, therefore they do not have certain rights and opportunities:

• do not have a unique legal status;
• cannot dispose of property;
• their rights are fully determined depending on the characteristics of the parent organization;
• The society itself is responsible for the activities of the branches.

Representative offices do not act as independent taxpayers, but under Art. 19 of the Tax Code, they transfer taxes at the location. The head is appointed by the founders of the company, after which he is issued a notarized power of attorney.

Obligation between founders

All activities of the company are based on the relationship between the participants who have invested their shares in the company.

The rights and obligations of the founders are prescribed in the memorandum of association. This document must be signed by each participant. The contract is terminated only after the liquidation of the company.

This economic characteristic of an LLC indicates that there are mandatory conditions and relationships for all participants to follow.

Need for charter

This document is the main provision on the basis of which the company operates. The charter certainly contains many significant information, which include:

• full and abbreviated name of the organization;
• postal and legal address;
• description of governing bodiescompany;
• rights and obligations that the participants of the enterprise have;
• procedure on the basis of which the founder has the opportunity to withdraw from the company;
• rules used when selling a share in the authorized capital to other participants or other persons.

Thus, the general characteristics of an LLC include many different features of the enterprise. It should be studied by every entrepreneur who decides to start his own business. A company is a legal entity, the creation of which may involve a different number of founders. To open a company, it is required to form an authorized capital and write a charter. The organization can act only on the basis of the existing rights and obligations of the participants. After a thorough study of the features of an LLC, it is possible to work profitably in the chosen line of business.