Limited Liability Companies & Limited Liability Partnerships Chapter 39
Introduction to Limited Liability Companies and Limited Liability Partnerships Two more business model options for those starting a business are Limited Liability Company and Limited Liability Partnership. Both the LLC and the LLP offer flexible options for those going into business. Most states have laws in place that govern both LLC and LLP.
Limited Liability Companies (LLC) Limited Liability Companies were created out of state law. A LLC is organized pursuant to the laws of the state in which the LLC is being organized. These laws are called limited liability company codes . An LLC is a separate legal entity, distinct from its members.
Taxation of LLCs Under the Internal Revenue Code and regulations adopted by the IRS, for income tax purposes, an LLC is taxed as a partnership unless it elects to be taxed as a corporation. As the default, a LLC is not taxed as an entity, its income and losses flow through to the members’ individual income tax return in a process called flow-through taxation or pass-through taxation.
Power of LLCs An LLC has the same power as an individual to do all things necessary and convenient to carry on its business. This includes: owning and transferring personal property, selling, leasing, and mortgaging real property, making contracts and guarantees, borrowing and lending money, issuing notes and bonds, suing and being sued, and taking other actions to conduct the business of the LLC.
Formation of the LLC Most LLCs are organized to operate business, real estate developments, and such. An LLC can be organized in only one state, even though it can conduct business in all other states. When choosing a state to organize a LLC in, the members should consider the LLC codes of the state of organization. When starting a new LLC, the organizers must must choose a name for the entity. The name MUST contain the words limited liability company or limited company or the abbreviation L.L.C., LLC, L.C, LC. Limited may be abbreviated as Ltd.
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- Fall '07
- Corporation, Types of business entity, Limited Liability Company, Limited liability partnership, a LLC