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Who needs LLC's?

Anyone beginning a new business venture should be concerned with a few basic truths. A very sad but true fact is that the society is becoming more litigious every day and, worse still, more unfortunate souls are finding themselves on the wrong side of lawsuits. Right or wrong, the experience of having to defend a legal action is stressful and debilitating. No one wants to be sued. So, that being said, there is a very simple point. If you are able to put a legal shield between you and creditors then, by all means, you should do it. The Limited Liability Company (LLC) is a completely separate entity. None of its members are personally liable for its debts whether they arise in contract or tort.

Another obvious truth is that the government continues to take even more from us in the form of taxes. This trend shows no signs of declining. Therefore, the taxpayer has to be creative and take advantage of every possible break. The LLC does not pay any tax itself (which is not the case with corporations) and it qualifies for partnership tax status. Partnership tax rules are more flexible and allow the tax planner a definite advantage over other forms of doing business. Anyone who is concerned with tax liability should seriously consider doing business as a limited liability company.

The drafting of the operating agreement is very important because it has to comply with both state and IRS regulations so that the LLC will be taxed as a partnership and not as a corporation.

If you need to raise money for a real estate or venture capital project, then an LLC is a perfect vehicle. Admitting new members is a simple process and there are no limits as to the number or character of additional investors. They can include all types of individuals, corporations, trusts, pension plans, foreigners (both out of state and out of the country). This is the case with the corporate structure, especially the subchapter S corporation.