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Wednesday, July 9, 2014

Business Attorney Peter J. Lamont Explains the Basics of a Limited Liability Company (LLC)

The limited liability company (LLC) is a flexible type of enterprise that combines the elements of a partnership with corporate structures.  

Here are the benefits of an LLC:

Limited Liability. Members are protected from personal liability for business decisions or actions of the LLC. This means that if the LLC incurs debt or is sued, members' personal assets are usually exempt. This is similar to the liability protections afforded to shareholders of a corporation. Keep in mind that limited liability means "limited" liability - members are not necessarily shielded from wrongful acts, including those of their employees.

Less Recordkeeping. An LLC's operational ease is one of its greatest advantages. Compared to an S-Corporation, there is less registration paperwork and there are smaller start-up costs.

Sharing of Profits. There are fewer restrictions on profit sharing within an LLC, as members distribute profits as they see fit. Members might contribute different proportions of capital and sweat equity. Consequently, it's up to the members themselves to decide who has earned what percentage of the profits or losses.

The LLC has grown in popularity, becoming one of the top most prevalent business formats in the entire United States. All fifty states allow various forms of the LLC business structure after Wyoming passed legislation in 1977. However, as the LLC's popularity has ballooned, unforeseen issues have come-about with these new statutes, especially around single-member LLCs, such as in California, New Colorado, Georgia, York and Florida where personal asset protection has become undetermined.

For the purpose of U.S. federal income tax, an LLC is treated as a pass-through entity or a Nontaxable entity by default. Should there be only one member in the company; the LLC will then be treated as a "disregarded entity" or a business entity that is separate from the owner for tax purposes. Individual owners must record the LLC's gross income or loss on the Schedule C of his or her individual tax return.
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If you would like more information about this topic or have general legal questions, please feel free to contact me at (973)949-3770 or via email at plamont@peterlamontesq.com We answer legal questions on a daily basis and would be happy to discuss any issues or questions that you have with you.  Offices in: New Jersey New York, Colorado & Puerto Rico.  Affiliated throughout the country.

© 2014, Law Offices of Peter J. Lamont. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between the firm and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.
If you would like more information about this topic or have general legal questions, please feel free to contact me at (973)949-3770 or via email at plamont@peterlamontesq.com We answer legal questions on a daily basis and would be happy to discuss any issues or questions that you have with you.  Offices in: New Jersey New York, Colorado & Puerto Rico.  Affiliated throughout the country.

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