If an S corporation election is made, income (loss) is taxed directly to the shareholders since an S corporation is only a conduit for tax purposes. Regardless of its status (regular “C” or “Subchapter S”) for tax purposes, corporations provide shareholders with the advantages of limited liability and an independent legal existence apart from its owners. Limited Liability Company A limited liability company is a legal entity created under state law, although there are non-U.S. LLCs as well. The LLC is an entity separate from its owners. The advantages are:
It allows complete pass-through tax advantages
Operational flexibility of a partnership
Corporation-style limited liability (under state law)
Management participation by all members
The disadvantages are:
Because of the newness of LLCs, many issues are yet unsettled
Some states do not sanction LLCs
There are restrictions on transferring membership interests
LIMITED LIABILITY COMPANY (LLC)
TOPIC
CORPORATION (“C” or “subchapter S”) The business and its stockholders-owners are separate entities. The business is a legal unit unto itself, capable of acting in its own name and right. Business and personal assets are entirely separate. Limited to any unpaid stock subscription liabilities in absence of fraud or other special circumstances. By consent and authorization of state law after compliance with the formalities.
Relationship of Owner to Business
The business and its stockholders-owners are separate entities. The business is a legal unit unto itself, capable of acting in its own name and right. Business and personal assets are entirely separate. No personal liability, in absence of fraud or other special considerations. By filing Articles of Organization with the applicable Secretary of State, then an ownership agreement. Members determine how profits and losses will be distributed.
Liability of Owner for Firm Debts
Creation and Organization
Sharing of Profits
Shared indirectly through dividends declared by directors out of profits and
MOLLY MAID Right Start Manual Copyright 2015, Molly Maid, Inc.
Page 8
Proprietary and Confidential Information
Made with FlippingBook - professional solution for displaying marketing and sales documents online