Limited-Liability Companies

By: Allen T. May, C.E.O. of Westwood Associates, LLC

A new form of ownership called a "limited-liability company" has been approved in all 50 states, although each state's laws may differ. A limited-liability company (LLC) is a form of business ownership that combines the benefits of a corporation and a partnership while avoiding some of the restrictions and disadvantages of those forms of ownership. Chief advantages of an LLC are as follows:

1.) LLCs with at least two members are taxed like a partnership and thus avoid the double taxation imposed on most corporations. LLCs with just one member are taxed like a sole proprietorship. LLCs can even elect to be taxed as a corporation if there are benefits to offset the corporate double taxation*. 

2.) Like a corporation, it provides limited-liability protection for acts and debts of the LLC. An LLC thus extends the concept of personal-asset protection to small business owners. 

3.) The LLC type of organization provides more management flexibility when compared with corporations. A corporation, for example, is required to hold annual meetings and record meeting minutes; an LLC is not. 

Although many experts believe that the LLC is nothing more than a variation of the S-corporation, there is a difference. An LLC is not restricted to 100 stockholders - a common drawback of the S-corporation. LLCs are also less restricted and have more flexibility than S-corporations in terms of who can become an owner. Although the owners of an LLC may file the required articles of organization in any state, most choose to file in their home state - the state where they do most of their business. For more information about the benefits of forming an LLC, go to http://www.llc.com.

Because of the increased popularity of the LLC form of organization, experts are predicting that LLCs may become one of the most popular forms of business ownership available.

* Double Taxation: Corporations must pay a tax on their profits. In addition, stockholders must pay a personal income tax on profits received as dividends. Corporate profits thus are taxed twice - once as corporate income and a second time as the personal income of stockholders. Note: Both the S-corporation and the LLC eliminate the disadvantage of double taxation because they are taxed like a partnership. These special types of ownership still provide limited liability for the personal assets of the owners.

For more information, please contact me as follows:

Allen T. May

cell: (214) 893-2623

email: allentmay@gmail.com