A popular organizational and legal form of a legal entity in Russia is a limited liability company (LLC). Businessmen often solve a dilemma - to organize a new business with the creation of a company or to register an individual entrepreneur. At the same time, it is important to understand: a limited liability company - what it is. To establish a serious business that attracts investment and prospects for further development, the best solution would be to open an enterprise with exactly this organizational and legal form.
Pros and cons of LLC
Limited liability company – this is the abbreviation for LLC. This is a commercial organization, the purpose of which is to obtain systematic profit by one or more persons (legal entities or individuals). (Articles 87 – 94 of the Civil Code of the Russian Federation) and from 08.02. 1998 at the legislative level regulate its activities.
This form of business organization has a number of serious advantages over others. The most significant of them can be considered the limitation of liability that members of the company bear for its obligations to third parties. The measure of responsibility is determined by the size of the share in the authorized capital (AC) of a particular participant, which is recorded in the constituent documents.
The advantage of an LLC over other legal forms is also that it can develop any type of activity that is defined by its charter and is not prohibited by law. However, the provision of services and the production of goods can only be carried out with a special permit - a license. Also, the company is liable with property only for its obligations. Its liability for the obligations of the founders is excluded.
Before creating a company, it is worth understanding what kind of business organization an LLC is.
An organization is considered established only from the moment of state registration of it as a legal entity. There is no need to deposit the authorized capital in advance; this can be done within 4 months from the date of registration and opening of the current account.
The life of an LLC is not limited, unless determined by the charter.
Having found out all the possible pros and cons of an LLC, you can begin to create it. To do this, the founders must unanimously pass a verdict on the establishment of the company at a general meeting, or such a decision is made individually when the organization is created by one person.
If there are several such persons, a constituent agreement is concluded between them. The presence of this document leaves no doubt as to whether an LLC is an individual or a legal entity, since it reflects:
- the procedure for joint activities of participants to create a company;
- method and size of formation of the management company;
- the nominal value and value of the shares of each participant;
- terms and procedure for making shares.
The procedure for creating a limited liability company, founders (participants) of the company
The legal status of an LLC regulates the main points that relate to the creation of a company and any problems that may arise in the process of active activity. The registration process is prescribed in the civil legislation of our country, and fully complies with all norms and principles of law.
The activities of the LLC occur on the basis of the charter, which lists all the rights and obligations of the organization’s participants, and also contains information regarding their name, composition and size of the share capital for each of them.
Registration of an LLC with government authorities can be carried out solely on the basis of the statutory documentation, which must be signed by all participants of the company. This documentation must contain the following information:
- Information about the composition of the founders, their passport details and information about registration and permanent residence;
- The competence of the founding council and all issues relating to the potential activities of the association;
- Information on the composition of the authorized capital indicating the share of the capital of each member of the company;
- Brand name of the future organization;
- Legal regulation of relationships between LLC members and information regarding the distribution of potential profits from activities depending on equity investments in the authorized capital;
- Formation of a management system for a limited liability company.
In addition to this information, the statutory documentation may also contain separate chapters that relate to the rights and obligations of company participants, as well as their interaction within the organization.
Founders of the society
The organizational and legal form of an LLC provides for the obligation of the founders to contribute their shares to the management company. The volumes and terms are established by the constituent agreement.
The founders can be legal entities and individuals, the number of which is legally limited and cannot be more than 50.
If in the course of economic activity the limit is exceeded, within a year the legal status of the LLC must be changed, the enterprise must be transformed into an open joint-stock company, a production cooperative, or liquidated. From the moment of state registration of the enterprise with the tax service, the founders become members of the company. Changes to their list are duly registered with the relevant authority. The composition of the participants also determines whether a particular LLC is a small business entity or not.
Authorized capital, its increase and decrease
The amount of money invested by the founders in the creation of an LLC to ensure its activities is called the authorized capital. This is the minimum amount of property that guarantees the interests of the participants.
The law establishes the minimum size of the capital company - 10,000 rubles, the maximum amount is not regulated by law.
The main fund is divided into shares if the company is founded not by one, but by several participants. In accordance with the amount of funds contributed, they will receive dividends from the profits received, which is the determining factor in the answer to the question, LLC is a commercial or non-profit organization.
The share of the management company can be contributed:
- securities;
- property rights;
- money;
- property;
- other rights with a monetary value.
The size of the organization's fixed capital can be increased or decreased after it has been fully paid (Clause 1, Article 17 of Federal Law No. 14-FZ). The increase is possible due to:
- additional contributions from participants;
- contributions from third parties;
- society's property.
The law requires that the size of the capital capital be reduced if it does not exceed the value of the company’s net assets. There are two ways to do this:
- repayment of shares owned by the company;
- reduction in the nominal value of the shares of all participants.
Company management structure
The peculiarities of LLC management are that the election or appointment of governing and managing bodies is a mandatory point in the meeting’s decision on the establishment of the organization. The management structure of the company includes:
- general meeting of participants (an LLC can also be founded by one person);
- supervisory board (board of directors), if its presence is provided for by the company’s charter;
- collegial executive body (directorate, board), sole executive body;
- the audit commission, if its election is provided for by the charter.
The supreme body of the LLC is the general meeting of participants. Its competence is determined by the charter, as well as Article 33 of Federal Law 14-FZ. Participants have the right to make decisions on the following issues:
- determination of goals and directions of development of the enterprise;
- approval of the charter, amendments to it;
- concluding unions and associations with other organizations;
- transformation of the management structure;
- creation of executive bodies, etc.
A board of directors or supervisory commission is created to resolve operational issues in the course of current activities. The main task is to ensure the interests of the founders and monitor the efficiency of the company. Thus, the answer to the question of whether an LLC is a state organization or a private one has an unambiguous answer, since we are talking only about the interests of private individuals and their property.
The direct management of the company is carried out by a director who is appointed by the general meeting. He performs his duties on the basis of an employment contract. At the same time, a directorate or board may be formed. If the organization has more than 15 persons, control over its activities may be entrusted to a special commission or expert.
Thus, in accordance with legal regulations, LLC management can only be carried out by:
- general meeting of owners;
- solely by the manager (director or general director).
Other structures are created at the discretion of the participants, depending on the specifics of the commercial activity.
LLC characteristics
The concept of such an organization has specific characteristics established by law. They must be followed to avoid problems with regulatory authorities.
Controls
Its structure consists of:
- The highest body is the general meeting of its founders. It can be carried out in accordance with planned events or out of turn. Each participant has the right to discuss problems that arise and vote when making a decision. Voting rights are determined in accordance with the size of the share in the authorized capital during the procedure regulated by the constituent documents. In a situation where the company's charter contains provisions limiting the possibilities of such a meeting, they are considered invalid. The competence of the structural body includes:
- making adjustments to the statutory and constituent documentation;
determination of types of commercial activities;
- election of the company's management and termination of their duties;
- profit sharing;
- appointment of audit of the enterprise's activities by auditors, etc.
- Executive agency. It may be represented by the company's president, director or manager reporting to the founders. He solves current problems that arise in the process of carrying out commercial activities, in particular:
- issues powers of attorney;
acts on behalf of the organization;
- hires, fires and transfers employees, etc.
- Board of Directors. Its powers, duties, procedure for creation and termination are established by the Charter. It may include a supervisory board. Its main tasks are:
- establishing the company's activities;
- election of the head of the organization;
- determining the amount of remuneration and compensation payments;
- making a decision to carry out an audit;
- opening representative offices and branches;
- other functions provided for by the Charter;
- Auditor (commission). Monitors the economic work of the company by providing access to reporting documentation and balance sheets and explanations of employees.
If necessary, an extraordinary meeting may be convened, the conditions and rules of which are determined by the Charter of the company.
The manager is approved by the meeting for a specific period, and an employment contract is signed with him. It can only be an individual.
Organizational and legal form
An LLC is a business company whose founders are not liable for the debts of the property they own and bear risks only within the limits of the shares invested in the capital of the organization.
Type of ownership
Civil legislation provides for the rules for creating the equity capital of an enterprise that has a private form.
It is formed by combining the contributions of the organization’s participants who make decisions about conducting commerce and developing the company.
The presence of private property prevents the creation of LLCs in the form of state institutions. The purpose of registering a limited liability company is only to conduct business and make a profit.
It is worth noting: in the event of debt or bankruptcy of an organization, its founders are not liable with personal property. Debts are reimbursed with the company's capital and finances earned during commercial operations.
The sale of part of the authorized capital can be carried out to any interested parties, but other participants are notified of the sale, since they have the primary right to purchase.
This means that first such shares are offered to the co-founders of the enterprise and the information is communicated to them in the manner regulated by regulatory enactments. Failure to comply with this rule will result in cancellation of the transaction and sanctions for the seller.
Participants
The Law of 08.08.2001 FZ-129 establishes the possibility of co-founding companies, individual entrepreneurs and individuals, including foreign ones, in LLCs.
But there are restrictions for these participants. They cannot be:
- citizens in military service;
- civil servants;
- employees of any branches of government;
- deputies of the State Duma of the Russian Federation and members of the Federation Council of Russia.
In addition, citizens must be legally competent and have reached the age of eighteen.
Restrictions also apply to legal entities. The following cannot become founders:
- A company created by one founder can be the sole participant of another organization.
- Bodies with government powers.
Having received the appropriate permission, municipal institutions have the right to organize companies in the form of LLCs, participate in their work and acquire part of their authorized capital, if such a possibility is provided for by their Charter.
The minimum number of participants is 1 person, the maximum is 50. If the number of shareholders established by law is exceeded, the company may be liquidated.
To avoid this, for example, it will be necessary to remove unnecessary entities from its composition or to reorganize the company into an OJSC, CJSC or cooperative.
Constituent documents
Article 52 of the Civil Code of the Russian Federation establishes a list of constituent documentation on the basis of which an organization is registered. It consists of:
- Articles of association.
- Establishment agreement.
What applies to constituent documents
The only constituent document of the company since July 1, 2009 is the charter. The articles of association must also be registered. Before creating the charter, participants need to find out which document specifies the requirements for the LLC. In accordance with Federal Law No. 14-FZ “On Limited Liability Companies” (Article 12, clause 2), the charter must reflect:
- size of the charter capital;
- rights and obligations of participants;
- competences of governing bodies;
- rules for storing company documents;
- the procedure and consequences of a participant’s withdrawal from the company.
The document must also indicate the details of the LLC.
Concept and characteristics of a limited liability company
A limited liability company (LLC) is an economic structure that was created on the basis of a decision to pool capital into an authorized capital, which is initially distributed among the organization’s participants on the basis of equity participation.
Members of the company cannot have any liability for transactions and agreements concluded on behalf of the company, bearing the risk of losses solely within the framework of their personal share in monetary terms.
The civil legislation of the Russian Federation classifies a limited liability company as a commercial structure, the main goal of which is to generate income in the maximum possible amount. At the same time, initially the authorized capital does not belong to the organization itself, but is distributed on a shared basis among community members.
Among the main features of an LLC are:
- An LLC is a commercial structure organized by several founders who invest their funds in the development of the organization’s activities in order to make a profit;
- All issues relating to LLCs are regulated in accordance with the Federal Law “On Limited Liability Companies”. This standard establishes that the composition of the company’s founders cannot exceed 50 people, and in addition, an LLC cannot be organized by one person;
- The authorized capital is formed from contributions of its participants. At the same time, they will bear the risk of loss of funds within the limits of their share in monetary terms;
- The LLC does not issue securities that would give third parties access to the company. Thus, the composition of the company's participants is practically unchanged;
- The founders do not bear any responsibility for the transactions and agreements of the company. All their liability will be limited to the share capital in monetary terms;
- The legal status of an LLC provides for the establishment of closer ties between the founders of the company, which are manifested in both the economic and commercial activities of the organization.
Responsibilities and rights of company founders
The rights and obligations of persons who are founders, and after registration - participants of an LLC, are regulated by Law No. 14-FZ. So they should:
- contribute your shares to the management company;
- keep confidential information about the activities of the company.
The rights of founders are more extensive:
- participation in company management;
- obtaining information about how the LLC operates, studying accounting documents;
- participation in the distribution of profits according to shares in the management company;
- the possibility of selling your share or part thereof to LLC participants or third parties;
- withdrawal from the membership with the alienation of one’s share to the company;
- receiving part of the property in the event of liquidation of the company.
What are the responsibilities of the participants
Participants of the company are liable for its obligations in accordance with the size of their share in the management company. However, such liability applies as long as the legal entity exists. If an LLC is declared bankrupt, the participants may be subject to additional or subsidiary liability. It arises if their interference in economic activity led to the bankruptcy of the enterprise. In this case, the damage is compensated by the personal property of the founders.
