Choice of Entity
After actively listening to our clients’ business plans, we are able to work with our clients and develop the best legal structure that fits each of our clients’ unique needs. Whether you need a Corporation, Limited Liability Company, Limited Partnership or General Partnership, Garces & Grabler, P.C. will draft the organizational documents with our clients’ interests and issues in mind.
LLCs are the Predominate Form of a Business
Forming a business as a Limited Liability Company has all the liability limitation advantages of a corporation and all of the tax advantages of a proprietorship or partnership. Only in rare circumstances should a new business be started as a Sole Proprietorship, Partnership or S Corporation. The LLC serves most new and growing businesses well.
Fundamental Tax Advantages
The essential advantage of a Limited Liability Company is that it provides pass-through treatment without taxation at the entity level, essentially partnership tax treatment, while shielding members from personal liability. Multiple member LLCs are treated as a partnership and file a U.S. Partnership Tax Return Form 1065. Single Member LLCs can be treated as a Sole Proprietorship and are taxed on the member’s 1040 Schedule C. Limited Liability Companies then provide the advantage of protecting its members from the liabilities of debts and obligations, similar to corporate shareholders.
It should be noted, however, that this limited liability has been continuously eaten away, particularly in the area of environment law, and it is not expected that Limited Liability Companies would fare any better. If a Limited Liability Company is properly structured, it will be treated as a partnership pass-through entity.
General Tax Classification
Because a Limited Liability Company is an unincorporated business entity, the Internal Revenue Service will not treat it as a corporation unless it has more corporate characteristics than non-corporate characteristics. The Entity Classification Election filed with the IRS can specify whether the LLC will be treated as a Corporation, Partnership or Proprietorship. Our law firm will prepare and file this selection with the IRS when your LLC is formed.
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