Selection of Entity Primer - The LLC
There is simply not enough time and space to do a full, in-depth analysis of LLC legal matters in a blog and so it is in your best interest to consult an attorney on selection of entity matters. My goal here is to cover the very simple basics of liability and taxation of LLC’s in Wisconsin.
The LLC:
Partnerships have partners, corporations have shareholders, and LLC’s have members. One of the attractive features of the LLC entity is that each member has limited liability in that members do not have personal liability for the debts of the LLC. This means that any debts the LLC incurs belong solely to he LLC. However, members can be held liable for LLC debts if he or she personally guaranteed those debts (a good reason for members to think twice about about personally guaranteeing anything for the LLC). LLC members can also be held liable for any torts they commit; such torts are considered outside the member’s role as a member, making the torts individual and not on behalf of the LLC.
The primary income tax advantage of LLC’s is that they can be taxed as partnerships, meaning income taxes are assessed to the individual member. The key to this benefit is to not have the LLC recognized as taxable as a corporation, otherwise the benefit is lost.
Again, this is an extremely simplified explanation of the LLC, but it’s enough to get an idea of why the LLC form may be useful to you.
Friday, February 1st, 2008
