What is a Limited Liability Company (LLC)?
A limited liability company is a hybrid entity that can be used as a partnership, corporation, S-corporation, or a disregarded entity. A Limited Liability Company has many unique characteristics, and a few of them are outlined below:
- A state statute permits the formation of a limited liability company for any legal purpose.
- When articles of organization are filed with the appropriate secretary of state or the equivalent, a limited liability company can be formed by one or more individuals.
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The articles of organization may contain: the name of the limited liability company; the address of the primary business location or register office; the agent who was initially responsible for starting the process' name and street address; the LLC will be managed by a manager who may not be a member.
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Unless the articles provide otherwise, an LLC is assumed to be managed by its members.
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Without dissolution of the limited liability company, a member can transfer or assign their financial interest. This interest is a form of personal property. Nevertheless, the transferee is not admitted as a member.
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A member-managed LLC gives all members the right to participate and majority decisions are made.
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Managers who are not members of a managed LLC have equal rights. The majority of managers are responsible for deciding most business matters.
What is the process for filing taxes for a Limited Liability Company?
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Taxes are filed by a limited liability company as a disregarded entity and they do not file separately from Form 1040.
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Form 1065 is filed by a limited liability company if it has more than one member.
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If a limited liability company elects to be treated as an S-Corporation for tax purposes, it must file form 1120-S with the IRS.
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An LLC opts for the S-Corporation election to allow stockholders to withdraw payroll because the LLC's structure prevents members from doing so.
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An IRS election can be filed by a limited liability company to treat itself as a C-Corporation for tax purposes. To withdraw payroll or pass on the profit to their stockholders, a taxpayer may do it. A C-Corporation is not an entity that passes through like a LLC or S-Corporation.
What date should a limited liability company file their taxes?
Single-Member LLCs are treated as disregarded entities and their tax return is due on the same date as the individual tax return, which is typically April 15th.
Partnerships, including multi-member LLCs, are treated as partnerships and must file their tax returns by March 15th.
LLCs are opting to be taxed as Corporations:
For S-Corporations, the tax return must be filed by March 15th.
C-Corporations have until April 15th to submit their tax return.
The importance of an operating agreement for a limited liability company.
The operating agreement for an LLC is not obligatory, but it can be advantageous for the owners, and the following are highlighted:
- The agreement only allows for amendment by unanimous resolution of the members if it specifies otherwise.
- Issues like sharing profits and losses, voting rights, and the circumstances that led to dissolution may be addressed by the operating agreement.
Registered agent for an LLC
It is necessary for a limited liability company to have a registered agent for service of process and a registered office in the state.
The end of a limited liability company
The dissolution of an LLC occurs upon:
The end of a specific time frame or the occurrence of a specific event; The agreement provides for consent from a specific number or percentage of members;
When there is mention of a member's death in the articles; If the article mentions the death of a member, it should be mentioned.
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