Amongst all the business structures available, many upcoming entrepreneurs lean towards the LLC model. LLCs are Limited Liability Companies, in which all the profits are distributed amongst the partnering members whenever they establish. Other business structures include Sole Proprietorships, Partnerships, C Corps, and S Corps.
There are many reasons why LLCs are a popular choice, however, many entrepreneurs remain uncertain about one aspect: can an LLC issue stock? The answer is simply no, nevertheless, LLCs offer a range of benefits that may spark your interest in your current or future venture!
The great news is that an American LLC can be opened from any country in the world. Foreign entrepreneurs can start the process of creating a company in the United States from abroad. The process is entirely done online with Globalfy.
What is an LLC?
An LLC is a Limited Liability Company, in which the liabilities of the company are partially separated from its members. LLCs remain quite a popular choice among both domestic and international entrepreneurs. You can open an LLC as the sole owner (single-member LLC) or with multiple partners, the number of members is unlimited.
What is a stock?
To put it simply, a stock is an investment in a company that can be bought or sold amongst public exchanges (such as the New York Stock Exchange and the Nasdaq Stock Market, both located in Wall Street, NYC). When a company’s stock is purchased, the purchaser becomes a shareholder of the company, as the owned stock is called a “share”. Some business structures can issue stocks for financial investments, however, that is not the case with LLCs.
Private stocks exist as well. These are stocks that are offered exclusively by private companies to internal founders, employees, and accredited institutional investors. Private stocks are not available to the public or on public exchanges and do not meet the US Securities and Exchange Commission’s regulatory and disclosure requirements. Private companies do not disclose their financial information to the public, therefore the stocks exchanged and sold are kept secluded.
So, can an LLC issue stock? No, LLCs are not able to issue stock as they are private ownership arrangements, which are not to be traded on private or public exchanges.
What business structures can issue stock?
For international entrepreneurs, C Corporations can issue stock as they are publicly traded companies owned by shareholders. Although the Corp structure is still a great option for foreign entrepreneurs, you still need to keep in mind they are subjected to double taxation and have a much more rigid management framework. Private C Corporations can issue stock as well, however, the process is done privately, and with their own founders, employees, and investors. These stocks are not listed on public exchanges.
How can you raise capital for an LLC?
Limited Liability Companies cannot issue stock. However, raising or obtaining external capital for LLCs can be done through the offer of equity or debt.
An individual or entity has LLC equity when they buy an ownership percentage of the company, which entitles them to a certain amount of the profits, and thus they can contribute to decision-making.
In regards to debt, LLC members would not be offering up any control of the company, and as expenses rise, so do interests and fees. Other alternatives to issuing stock to raise capital are:
- Special grants or loans from state and local governments
- Venture capital investments
What are the benefits of opening an LLC?
While LLCs cannot issue stock, they still offer many benefits to entrepreneurs. These range from flexibility, taxation advantages, and limited personal liability.
LLCs are known as flexible business structures, meaning that LLC members have more say in management and decision-making. Meanwhile, C Corps are the complete opposite and are known to be more traditional and rigid in these aspects.
Unlike C Corps which are subject to double-taxation, LLC profits pass through directly to the members’ personal income tax return form. This is known as “pass-through” taxation, meaning that the LLC does not pay any corporate taxes and there is no risk of double taxation.
LLCs also offer their members partial liability protection from any financial issues that the company can incur. This is a separation between personal assets and the company.
How to open your own LLC?
Now that you know what an LLC entails, you can start the process of opening your own business in the US now! With the help of Globalfy and its expert team, the process can be done entirely online. Fill out the form and open your company in the US in less than 5 minutes. Your future LLC is right around the corner.
Globalfy also provides 1 year of Virtual Address and Registered Agent and a US bank business account in the all-in-one business formation plan. Start your own company now!