Advantages::Limited liability company
- Choice of tax regime. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation (as long as they would otherwise qualify for such tax treatment), providing for a great deal of flexibility.
- A limited liability company with multiple members that elects to be taxed as partnership may specially allocate the members' distributive share of income, gain, loss, deduction, or credit via the company operating agreement on a basis other than the ownership percentage of each member so long as the rules contained in Treasury Regulation (26 CFR) 1.704-1 are met. S corporations may not specially allocate profits, losses and other tax items under US tax law.
- Limited liability, meaning that the owners of the LLC, called "members", are protected from some or all liability for acts and debts of the LLC depending on state shield laws.
- Much less administrative paperwork and record keeping than a corporation.
- Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a C corporation.
- Using default tax classification, profits are taxed personally at the member level, not at the LLC level.
- LLCs in most states are treated as entities separate from their members. However, in some jurisdictions such as Connecticut, case law has determined that owners were not required to plead facts sufficient to pierce the corporate veil and LLC members can be personally liable for operation of the LLC (see, for example, the case of Sturm v. Harb Development<ref>Sturm v. Harb Development, 298 Conn. 124, 2 A.3d 859 (2010), http://www.constructionrisk.com/2011/06/principal-of-limited-liability-can-be-sued-without-need-to-pierce-corporate-veil/</ref>).
- LLCs in some states can be set up with just one natural person involved.
- Less risk to be "stolen" by fire-sale acquisitions (more protection against "hungry" investors).
- For real estate companies, each separate property can be owned by its own, individual LLC, thereby shielding not only the owners, but their other properties from cross-liability.
Limited liability company sections
Intro Overview Flexibility and default rules Income tax Advantages Disadvantages Variations International equivalents See also References
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