Unit 02: Company formation and management (solution)

Use the Google search engine (www.google.com) to compare the results of the following two search queries:

limited liability company

“limited liability company”

The first search query returns roughly ten times more hits than the second, which has been entered as an exact phrase.

The first search query will search for all documents featuring all of the words. The second search query limits the search to documents containing “limited liability company” as an exact phrase.

Although many of the hits will be identical for both, typing the phrase in quotation marks ensures that only the most relevant hits will be returned.

Clicking the Limited Liability Company 101 link gives you a detailed summary of the term ‘limited liability company’, together with a description of the advantages and disadvantages of limited liability companies.

The Limited Liability Company 101 page is part of the about.com web index, a useful source for quality online information.

Now try this search query:

“professional limited liability company”

Use the links provided by the search results to find the answer to question 1.

Answer
A limited liability company (LLC):

• is a type of business ownership combining several features of corporation and partnership structures;
• is not a corporation or a partnership;
• may be called a limited liability corporation (the correct terminology is limited liability company);
• owners are called members not partners or shareholders;
• number of members is unlimited and may be individuals, corporations, or other LLCs.

For more details on LLCs, see:

http://sbinformation.about.com/cs/ownership1/a/LLC.htm

Professional limited liability companies (PLLCs) are similar to LLCs, but are organised for the purpose of providing professional services (e.g. an accountant, a doctor, or a lawyer).

For more details on PLLCs, see:

http://www.form-a-corp.com/professional_corps.php

Now go back to the Google home page and click on the Advanced Search link to the right of the search bar.

To answer question 2, use the Advanced Search features to fine tune your search as follows:

This will limit the search returns to information placed online in the last three months. If it is not important to have recent information, you can enter a longer time limit to increase the number of hits returned.

The Occurrences criteria determines where the search engine will look to find the words or phrases entered in the search query. If in the title of the page is selected, then the main body of text on a web page will be ignored in favour of the page title. This will make the search much more specific.

You will notice that defining your search criterion dramatically reduces the number of hits. However, the hits you do get are likely to contain useful, up-to-date information.

Now change the Occurrences setting to:

If other people have linked to the page specifically because they have found useful information concerning the advantages of a limited liability company, there is a very strong chance that the returned hits will have the information you need.

This is an extremely useful feature. Your returned hits will now be limited to those websites which other people have found useful, rather than simply pages which happened to be in Google’s index.

Now use the Advanced Search settings to find the answer to question 2.

Remember, if your search query does not return a sufficient number of links, modify your settings to broaden your search criterion. Changing the Occurrences settings can greatly increase or reduce the number of hits.

These and other advanced searches can also be carried out directly from the search box. Enter Google cheat sheet into the Google search bar and click on the relevant link to get a useful list of short cuts and operators.

Answer
Advantages of operating as a LLC/PLLC:

Limited Liability: Owners of a LLC have the liability protection of a corporation.
A LLC exists as a separate entity much like a corporation. Members cannot be held personally liable for debts unless they have signed a personal guarantee.

Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLCs have much more flexibility.
No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Generally, this will be a tax advantage, but circumstances can favor a corporate tax structure.

Disadvantages of operating as a LLC/PLLC:

Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.

Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.

Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.

For more details, see:
http://sbinformation.about.com/cs/ownership1/a/LLC.htm

You can search for more than one phrase at a time in Google, and using synonyms or equivalent phrases in repeat queries can increase the chances of returning useful search results.

Compare the following searches to find out what foreign buyers should know before investing in a limited liability company.

“limited liability company” “foreign ownership”

“limited liability company” “foreign buyer”

“limited liability company” “foreign purchaser”

Now repeat this search strategy for professional limited liability companies to find the answer to question 3.

Answer
Generally, there are no restrictions on foreign ownership of a company formed in the United States. The procedure for a foreign citizen to form a company in the United States is the same as for a U.S. resident. It is not necessary to be a U.S. citizen or to have a green card to own a corporation or limited liability company formed in the United States.

For more details, see:

http://www.ukincorp.co.uk/s-7