Understanding the Distinction Between LLC Written Actions and Corporation Written Actions
When it comes to the world of business entities, two popular choices among entrepreneurs are Limited Liability Companies (LLCs) and corporations. These structures offer distinct advantages and features that cater to different business needs. One important aspect that sets them apart is the process of documenting and approving decisions through written actions. In this article, we’ll delve into the nuances of LLC written actions and corporation written actions, highlighting the key differences between these approaches.
1. The Nature of the Entities: At the core of the differences between LLCs and corporations lie their fundamental nature and purpose. An LLC is designed to combine the benefits of limited liability protection with a more flexible internal structure. Corporations, on the other hand, are recognized as separate legal entities from their shareholders, and they follow a more structured governance framework.
2. Governing Documents: One of the most pivotal distinctions between LLCs and corporations is the documents that govern their operations. LLCs operate under an “operating agreement,” a flexible internal contract that outlines the company’s management structure, decision-making processes, and member rights. Corporations, however, are governed by the “articles of incorporation” or “certificate of incorporation,” which establish the corporation’s existence, as well as the “bylaws,” which lay out the rules for its internal governance.
3. Decision-Making Flexibility: LLCs are known for their adaptability and the freedom they offer when it comes to decision-making. Operating agreements can be customized to suit the preferences and needs of the members. This means that the decision-making process can be tailored to the specific dynamics of the LLC and its owners.
Corporations, by contrast, adhere to more formal decision-making processes. Decisions are often made through meetings of the board of directors and, in some cases, shareholder meetings. The voting procedures are typically defined in the corporation’s bylaws, which adds an extra layer of structure to the decision-making process.
4. Written Actions: Written actions refer to decisions and actions taken within a company without convening a formal meeting. Here’s how they differ between LLCs and corporations:
- LLC Written Actions: In the realm of LLCs, written actions are generally more informal. Members (owners) can agree upon various methods of decision-making, often outlined in the operating agreement. When a decision needs to be made, members can express their consent through written resolutions. This provides a level of convenience and flexibility for LLCs, particularly those with a smaller number of members.
- Corporation Written Actions: In the corporate sphere, written actions are typically termed “written consents” or “unanimous written consents.” These actions are decisions made by the board of directors or shareholders without holding a formal meeting. While they offer convenience, they often involve more procedural formalities due to the structured nature of corporations. The exact procedures and requirements for these written actions can vary based on state laws and the corporation’s bylaws.
5. Formalities and Compliance: LLCs are favored for their reduced formalities compared to corporations. This is particularly attractive to small business owners who want the benefits of limited liability without the administrative burdens that can accompany a more structured governance system.
Corporations, however, must adhere to more formal requirements due to their distinct legal status. These formalities are in place to ensure transparency, proper governance, and the safeguarding of shareholders’ interests.
Conclusion
The distinction between LLC written actions and corporation written actions reflects the broader differences between these business entities. While LLCs offer flexibility and adaptability in decision-making, corporations adhere to more structured processes. Understanding these differences is essential for entrepreneurs to choose the entity type that best aligns with their business goals and preferences. It’s recommended to consult legal professionals to navigate the complexities of LLCs and corporations and make informed decisions based on the specific legal requirements in your jurisdiction.
Video Transcript
What is the Difference Between LLC Written Actions and Corporation Written Actions?
They are really the same. The same requirements apply. You can look at the state laws for your particular type of company and see if there is any reference to written actions and follow those. So, the Corporations Act for your state (if you have a corporation), and the LLC Act for your state (if you have an LLC.) Often, there is a section on written actions there.
You should also look at your articles and bylaws. Usually, it is in the bylaws. There will be a statement on whether actions are authorized or prohibited.
Conclusion
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