Limited Liability Company A limited liability company is a relatively new form of business organization with the limited liability characteristics of a corporation and the ability to be treated for tax purposes as a pass through entity: that is, for a single member limited liability company to be treated as if it were a sole proprietorship, and for a multi-member limited liability company as if it were a partnership. On formation the limited liability company is treated as a sole proprietorship or partnership unless the limited liability company elects to be taxed as a corporation in which case it is taxed as if it were a “C” corporation. This form of organization provides pass through tax treatment without the restrictions applicable to an “S” corporation such as a limit on the number of shareholders, the requirement of only a single class of stock, and limited types of non-individual shareholders Limited liability companies are formed under a different statute than are corporations. Where corporations file articles of incorporation with the Secretary of State’s Office and have shareholders, limited liability companies file articles of organization and have members. As with corporations there are many post-formation requirements and issues which are discussed in A Guide To Starting A Business In Minnesota The owner of a single member limited liability company being taxed as a sole proprietorship files federal and state income tax returns using the owner’s Social Security Number and federal Form 1040 with accompanying schedules and state tax form M1. Owners of a multi-member limited liability company do likewise, but a multi- member limited liability company must have its own federal and state tax identification numbers even if it has no employees A single member limited liability company requires those tax numbers only if it will have employees or elects to be taxed as a corporation.
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