Previous
Page Limited Liability
Companies A limited liability ("LLC")
is a non-corporate business entity, in which all members have
limited liability protection, in which all members can participate
in management and control, and which, if appropriately structured,
is taxed as a partnership rather than a corporation for federal
income tax purposes. By combining limited personal liability
with partnership tax classification, the LLC can provide advantages
which are unavailable to corporations, partnerships or limited
partnerships thereby affording investors the latitude to participate
in business ventures. Additionally, the LLC may be an appropriate
vehicle for real estate investment, because it combines liability
protection with favorable partnership tax treatment. Although
real estate ownership crates potential liability under mortgages,
leases and other contracts, environmental laws and other laws
real estate investors traditionally have avoided using corporations
because they have considered taxation on in-kind contributions
of real estate to be disadvantageous and because they have desired
flow-through treatment of losses, enhanced by the increased
basis provided through debt financing. Accordingly, a LLC, if appropriately structured
to be classified as a partnership for federal income tax purposes,
is permitted to allocate tax items of income, gains, losses,
deductions, and credits among its members in accordance with
its "partnership agreement" (i.e., operating agreement
or regulations). There are no major differences in the federal
income tax treatment of LLC'S and limited partnerships. The
principal advantage of the LLC the limited partnership is the
limited liability protection afforded all LLC members and managers.
Limited partnerships are required to have one or more general
partners, who are personally liable for partnership debts and
obligations. The LLC affords limited liability protection to
its members regardless of the extent to which they participate
in management and control of the LLC business affairs. A similar
result might be obtained by use of a limited partnership with
a corporate general partner controlled by the limited partners. If the IRS continues to ease its positions
concerning free transferability and continuity of life, and
if states continue to adopt LLC statutes, these constraints
will diminish or dissolve, and the LLC will become the entity
of choice for more transactions. A very affective and useful Asset Protection
vehicle would entail the use of a LLC. The specific arrangement
would depend on your particular circumstances, business activity,
and the type of assets owned. If you are engaged in any business
or if you own property, we recommend that you take necessary
steps to arrange your affairs in order to maximize the income
tax, estate planning and law suit protection techniques currently
available. NEXT
National
Business Incorporators, Inc.
Direct: (760) 774.2340 Fax: (760) 406.9331 E-mail: National
Business Incorporators, Inc. We look forward to serving
you! |