Limited liability company.

Limited liability company (LLC) is probably the most convenient form for organisations with simple shareholding structure. A LLC has elements of a partnership and of a corporation. It is the most popular form for business activity in Russia.

A limited liability company is a separate legal entity with its own identity, distinct from that of its members. It may own property, be party to contracts and sue and be sued in its own name. Participants (shareholders) of a limited liability company are, in principle, not liable for the debts incurred by the company; in other words they enjoy limited liability. In exceptional circumstances, however, when bankruptcy of the company is caused by shareholders that have right to give instructions obligatory for the company or otherwise determine its actions, a court can look behind the company's own existence to make shareholders liable.

A participant in an LLC has the right to sell or otherwise alienate its share or part of it to other participants and, unless forbidden by the founding documents, to the third parties. Exit of a participant from a company, a participant's death or loss of legal capacity does not cause liquidation of the company. Shares in an LLC pass to the heirs and legal successors, unless prohibited by the charter documents.

The number of shareholders in an LLC can not exceed 50. As already noted, the company's founding documents can prohibit alienation of shares to third parties, in inheritance or disposal as a gift. Participants in an LLC have a pre-emptive right to purchase another participant's share. An LLC can not give public subscription to its shares or list them on a stock market. Participants have a right to exit from the company at any time and demand withdrawal of the part of the company's property that is proportional to their share.

The limited liability company is generally a less expensive form of legal undertaking than a joint-stock company, but, unlike JSC, a limited liability company must register every change in its shareholding in the relevant registration body and as such this does have a cost factor associated with it. Another disadvantage of using LLC is a right of withdrawal, which, if done at the wrong time, might cause substantial difficulties to the company.

 

 

Share/Save