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GLOSSARY

MEMBER

A member of an LLC has ownership in the company. If there is just one member of the LLC, it is called a "Single-Member LLC" and if there are more than one member it is called a "Multiple-Member LLC".

MANAGER

You will typically find larger LLCs being managed by managers. Managers are appointed by the members of the company to conduct the company's business concerns. Managers are not excluded from being members of an LLC. Smaller LLCs are generally managed by its own members ("Member-managed LLC").

REGISTERED AGENT

A registered agent is responsible for receiving Service of Notice served upon the company within the jurisdiction of any state where the company conducts business. Service of Process generally includes any legal proceeding, legal notice, or official government communication presented to the company and the registered agent helps keep the company in compliance with these notices. The most common and prefered way of abtaining a registered agent is throught the NRAI which is a company providing registered agents in all 50 states.

BASIS

A member's basis in his or her LLC interest is equal the amount of cash the member contributes to the LLC, the basis the member had in any property contributed, and the member's share of the LLC's debt. A member's basis is increased by the member's share of LLC income or gains and any additional contributions. A member's basis is decreased by any cash distributions the member receives and net losses the member deducts.

CAPITAL ACCOUNT

A capital account is a separate account each member has which states the balance of the member's equity in the LLC.

"C" CORPORATION

A "C" corporation has two levels of tax (entity level and shareholder level), whereas, an LLC has only one level of tax (no entity level tax).

"S" CORPORATION

A "S" corporation is granted a special tax status where individual shareholders enjoy the benefits under state law of limited corporate liability but avoid corporate federal tax (one level of tax).

DISTRIBUTION

The amount of available cash or property that is distributed to the members.

IDEMNIFICATION

A contractual provision whereby the LLC will assume the liability of all claims brought against the members within the scope of the agreement.

OPERATING AGREEMENT

An agreement among the LLC members which governs the company's operations and the rights of its members.

DILUTION

A reduction in a member's percentage interest in the LLC.

 

 

 

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