LEGAL ENVIRONMENT
World Citizens SIT Ministries LLC as its name indicates is a Limited Liability Corporation.
LIMITED LIABILITY CORPORATION VS. CORPORATION
ADVANTAGES
One very important advantage of an LLC is the limited liability protections that if affords the members. If the debts of the LLC exceed its assets, or if there is an adverse judgment as a result of a lawsuit, the creditors cannot go after the members’ personal assets. This limited liability protection is a very important consideration when choosing a business entity. An investor in an LLC can only lose his or her initial investment. The members’ homes, savings, cars, etc. are not at risk. Another important advantage to the LLC is that an LLC is not subject to the double taxation provision that a corporation is subject to (unless it chooses to be taxed as a corporation). The IRS considers an LLC a pass through type of entity. In other words, the profits and losses from the business are not taxed at the LLC level. They are passed through to the owners of the LLC and taxed on the owners’ tax return at the owners’ level. This is also important for businesses that hold appreciating assets, such as real estate. The sale of real property that has appreciated would create a double taxation issue for a corporation. However, with LLCs, the capital gains are only taxed once at the members’ level.
Flexibility is another important aspect of the LLC. The detailed requirement of following bylaws and holding shareholder and directors meetings (keeping records of it all) are not required in the LLC. However, it is still important to enter into an operating agreement to detail how the LLC will be managed. This flexibility is also true for deciding how the assets of the business are divided if the LLC is dissolved, as well as how profits are divided between the members. LLCs often do not have the strict regulations dividing profits that corporations often are required to follow. For example, with an LLC you can set forth in the operating agreement that member A receives 50% of the profits, member B receives 30% and member C receives 20%. These distributions can even change with time. For example, distributions to members can revert to equal distributions after three years or after the business attains a certain level of income. There is additional flexibility in how the LLC chooses to be taxed. An LLC can be taxed as a partnership or a corporation (or if there is just one member/owner as sole proprietor). All of the clear advantages to an LLC have catapulted it as one of the most popular, if not the most popular, forms of business entities today. They offer the enormous advantages of limitation of liability as a corporation does, as well as its pass through provision for tax purposes. Today LLCs are relatively easy to form.
DISADVANTAGE
An LLC is not ideal for everyone. One important consideration is whether you intend to grow your business to the point of having many owners and potentially taking your company public (IPO). If those are your intention, an LLC may not be for you. While you can certainly have many, many member/owners, having more than 30 to 40 makes it logistically difficult to manage as an LLC. Although this is not a concern for most new businesses, you should keep in mind your ultimate plans for the business. Although an entity can generally change from an LLC to a corporation, and vice versa, there will likely be significant tax consequences. A final consideration of LLC may be somewhat minor. This is a consideration of prestige to your customers. Many businesses that serve retail customers prefer the corporation form of business entity. The average retail customer has no idea what an LLC is, and certainly does not understand the intricate differences between an LLC and a corporation. However, there is a perception that a business with “Inc.” at the end of its name has a sense of permanency and stability. A business name My Business LLC might not offer the same advantages to its retail customers. Licensing and bonding requirements will be met, as the resources required (such as funding) are received. Permits will be paid in full, as the resources required (such as funding) are received.
Health, workplace, or environmental regulations will be determined as each SIT community develops in accordance with local laws and ordinances.
Special regulations with regard to World Citizens SIT Ministries LLC will depend on what transpires as each SIT community develops, including but not limited to zoning or building code requirements and insurance coverage mandates.
Trademarks, copyrights, or patents (pending, existing, or purchased) will be paid for on all intellectual property as the resources required (such as funding) are received.