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Limited Liability Company (LLC)
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Definition
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A business entity which provides the limited liability of a corporation to its
members but avoids corporate income taxes.
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When Does It Apply?
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When participants don't want to be liable for debts in excess of their
investment yet receive partnership income tax treatment.
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How Does It Operate?
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Articles of Organization set forth the LLC purposes. Participants are called
members. Operating agreement governs the management.
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Advantages/Disadvantages
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Advantages - Limited liability to members. Members can participate or
delegate management. Direct pass through of profits or losses to the members.
Disadvantages - new and untested device.
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Estate/Gift Tax Implications
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Membership interest in included in taxable estate.
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Income Tax Implications
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All income tax consequences passed through to members.
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Other Considerations
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To be taxed like a partnership, LLC must not have two of these corporate
characteristics:
Centralized management - usually has
Continuity of life - usually not have
Free transfer ability of interests - usually not have
Limited liability - always has
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