Business Transactions

Limited Liability Corporation (LLC)

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A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

LLCs are popular because owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to IRS Publication 3402, Tax Issues for Limited Liability Companies (PDF).

Recent Changes

In August 2007, final regulations (T.D. 9356) were issued requiring single member LLCs (SMLLCs) to be treated as the taxpayer for employment tax and excise tax obligations. The SMLLC will continue to be disregarded for other federal tax purposes. This change will begin for excise taxes that accrue after January 1, 2008, and for employment taxes that accrue after January 1, 2009.

After January 1, 2009, Notice 99-6 is obsolete and the SMLLC will be responsible for collecting, reporting and paying over employment tax obligations using the name and EIN assigned to the LLC.

Click one of the links below for additional information about the different types of business that are available:

• Corporation (Inc.)
• S Corporation
• Sole Proprietorship

For information about how to start a new business or to protect your business investments, contact Coastal law today. Our goal is to provide businesses with the knowledge needed to succeed.