Limited Liability Company – Combines the operational flexibility and favorable tax treatment of partnerships with the limited liability feature of a corporation.
LLC Facts to Know
Tax flexibility – By default, an LLC is treated as a “pass-through” entity for tax purposes, much like a sole proprietorship or partnership. This means that LLCs avoid double taxation. However, an LLC can also elect to be treated like a corporation for tax purposes, whether as a C corporation or an S corporation.
Ability to place membership interests in a living trust – Members of an LLC are free to place their membership interests in a living trust.
Contributions – members contribute in the form of cash, property, services, or promises to contribute cash or property or to perform services.
Property contributions. Contributing property to set up an LLC is not taxable, even for minority interest owners.
Ability to deduct losses. Members who are active participants in the LLC’s business can deduct its operating losses against the member’s regular income to the extent permitted by law.
Limited liability – a creditor may not seek satisfaction of any limited liability company debt against the personal assets of any member.
Tax advantage – the members each pay their share of tax on their share of profits avoiding double taxation of LLC profits.
Number (unlimited) and type of investors (can be individuals, LLCs, Corporations, Trusts, Partnerships) and there are no restrictions as to ownership unlike an S corp.
Non-transferable interest – a member may not transfer his voting interest without concurrence of all remaining members.
Ease of transferability – A limited liability company and all of its assets and accounts may be transferred by the simple assignment of an interest (stake) in the company.
Management – The management of the business and affairs of an LLC may be conducted by the members or, if the members agree, may be vested in a manager or managers.
Continuity of life – the term of existence must be stated in the Articles of Organization. In most States perpetual duration is accepted.
Can convert to a Series LLC (instead of using multiple LLCs) to segregate assets and liabilities.
Your state may impose income taxes on LLCs even though the IRS doesn’t.
Converting an S or C Corporation to an LLC may carry too heavy a tax price.
Unfavorable state tax rules and fees. In some states, an LLC must pay higher taxes and fees than would a corporation that generated the same revenues.
What is a Series LLC?
A Series LLC is a special form of a Limited liability company that provides liability protection across multiple “series” each of which is theoretically protected from liabilities arising from the other series.