Taxation

Explores how Limited Liability Companies are taxed and the benefits and drawbacks of different tax classifications.

What is a limited liability company (LLC) and how does it differ from a corporation?

Quote: "An LLC is a hybrid legal entity having certain characteristics of both a corporation and a partnership or sole proprietorship."

What are the benefits of forming an LLC?

Quote: "LLCs are well known for the flexibility that they provide to business owners..."

Can an LLC elect to be taxed as a corporation instead of a partnership?

Quote: "depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership..."

Are LLCs allowed to be organized as not-for-profit entities?

Quote: "under certain circumstances, LLCs may be organized as not-for-profit."

What is a professional limited liability company (PLLC)?

Quote: "In certain U.S. states, businesses that provide professional services requiring a state professional license... may be required to form a similar entity called a professional limited liability company (PLLC)."

What is the primary characteristic that an LLC shares with a corporation?

Quote: "The primary characteristic an LLC shares with a corporation is limited liability..."

What is the primary characteristic that an LLC shares with a partnership?

Quote: "the availability of pass-through income taxation."

How does the terminology associated with an LLC differ from that of a corporation?

Quote: "When an LLC is formed, it is said to be 'organized', not 'incorporated' or 'chartered'..."

What is the founding document of an LLC called?

Quote: "its founding document is likewise known as its 'articles of organization'..."

How is ownership represented in an LLC?

Quote: "ownership in an LLC is represented by a 'membership interest'..."

What is the document that evidences ownership rights in an LLC called?

Quote: "a document evidencing ownership rights in an LLC is called a 'membership certificate'..."

How does piercing the LLC veil differ from piercing the corporate veil?

Quote: "it is more difficult to pierce the LLC veil because LLCs do not have many formalities to maintain."

What is the mechanism that protects membership interests in LLCs?

Quote: "Membership interests in LLCs and partnership interests are also afforded a significant level of protection through the charging order mechanism."

Can LLC members incur personal liability in certain circumstances?

Quote: "Limited liability company members may, in certain circumstances, also incur a personal liability..."

Under what conditions may LLC members incur personal liability?

Quote: "in cases where distributions to members render the LLC insolvent."

Does an LLC have the same alter ego piercing theories as a corporation?

Quote: "most American courts have held that LLC members are subject to the same common law alter ego piercing theories as corporate shareholders."

What is the document that governs the internal operations of an LLC called?

Quote: "Internal operations of an LLC are further governed by its 'operating agreement'."

How is ownership measured in an LLC?

Quote: "ownership measured in 'membership units' or just 'units' and at other times simply stated only as percentages."

Are LLC owners called shareholders or members?

Quote: "a 'member', rather than a 'shareholder'."

What kind of liability protection does an LLC offer its owners?

Quote: "it is a legal form of a company that provides limited liability to its owners in many jurisdictions."