A Limited Liability Company (LLC) is a separate legal entity that can conduct business just like a corporation with many of the advantages of a partnership. It is taxed as a partnership. Its owners are called members and receive income from the LLC just as a partner would. There is no tax on the LLC entity itself. The members are not personally liable for the debts and obligations of the entity like partners would be. Basically, an LLC combines the tax advantages of a partnership with the limited liability feature of a corporation.
An LLC is formed by filing articles of organization with the secretary of state in the same type manner that articles of incorporation are filed. The articles must contain the name, purpose, duration, registered agent, and principle office of the LLC. The name of the LLC must contain the words Limited Liability Company or LLC. An LLC is a separate legal entity like a corporation.
Management of an LLC is vested in its members. An operating agreement is executed by the members and operates much the same way a partnership agreement operates. Profits and losses are shared according to the terms of the operating agreement.
Puerto Rico's Operating Agreement for States Who Have Adopted the Uniform Limited Liability Act and the Revised Uniform Limited Liability Act In Puerto Rico, an Operating Agreement is a legal document that outlines the rules and regulations of a limited liability company (LLC) which operates within states that have adopted the Uniform Limited Liability Act (UCLA) and the Revised Uniform Limited Liability Act (SULLA). This agreement serves as an important tool for LCS, as it establishes the rights and responsibilities of the members and governs the overall operation and management of the business. There are different types of Operating Agreements available in Puerto Rico, which provide flexibility to LCS based on their specific needs and circumstances. These variations include: 1. Basic Operating Agreement: This is a standard agreement that covers the fundamental aspects of an LLC's operation, such as the allocation of profits and losses, voting rights, decision-making procedures, capital contributions, and distribution of assets. 2. Manager-Managed Operating Agreement: This type of agreement is suitable for LCS where the members elect to appoint one or more managers to handle the daily operations of the company. The managers are responsible for making business decisions on behalf of the LLC, while the members typically have limited involvement in the day-to-day activities. 3. Member-Managed Operating Agreement: In contrast to a manager-managed agreement, this type of operating agreement is more suitable for LCS where the members actively participate in the management and decision-making process. Each member has a say in the company's affairs and can act as an agent on behalf of the LLC. 4. Profit Sharing Operating Agreement: LCS may choose to adopt this agreement to define the distribution of profits among members. It allows the LLC to allocate profits based on predetermined percentages or specific contribution levels, enabling members to receive distributions in line with their investment or involvement in the business. 5. Mergers and Acquisitions Operating Agreement: This agreement outlines the procedures and conditions under which an LLC may merge with another company or acquire new businesses. It sets forth the process of incorporating new entities, transferring assets, liabilities, and membership interests, and outlines the voting and consent requirements for such significant transactions. In Puerto Rico, an Operating Agreement is crucial for an LLC as it provides clarity and legal protection for all members involved. It ensures that the company's operations are conducted efficiently, effectively, and in compliance with the UCLA and SULLA. It is highly recommended for LCS operating in Puerto Rico to consult with legal professionals to draft and customize their Operating Agreement to suit their specific requirements and adhere to the laws and regulations in place.
