When I was just a youngster fresh out of law school, LLCs were these exotic things that no one understood. In fact, like many unfamiliar things, the more conservative corporate lawyers were afraid of them – afraid their tax treatments wouldn’t be recognized by the IRS, afraid not having to keep minutes of meetings would subject their clients to getting their liability shield pierced, and other apocalyptic fears.
Since I grew up with LLCs, I love them. Here are the top ten things I love about the LLC.
10. Corp x Partnership = Entity Goodness
A limited liability company is a combination of a corporation and a partnership – it has limited liability and pass through tax treatment.
9. No Meetings Required
Owners and managers aren’t required to hold regular meetings or keep records of meetings (though they should do these things anyway).
8. Like Corporate Yoga
An LLC is extremely flexible. You can pretty much shape and reshape the inner workings of the LLC in a variety of ways, including structure of management and allocations of profits, losses and distributions of cash to members.
7. Sweat Equity Not a Killer
An owner can put in sweat equity and not get slammed with tax (as long as the operating agreement says that the owners who put cash in get paid back first on liquidation.)
An LLC distributes cash to its members pretty much tax free (because only the profits of the LLC are taxed).
5. Easy Tax Reporting
An LLC owned by just one person is treated as a “tax nothing” – the taxes get reported on the owner’s return.
4. Easy Equity
You don’t have to amend the articles to create a class of equity (like you do with a corporation).
3. Diverse Equity Choices
You can have many classes of equity if you write it out in the operating agreement.
2. The Series LLC
The Series LLC, a creation of Illinois law that treats a bunch of LLCs like a single store with separate specialty boutiques.
1. And You?
I can’t think of another one – can you?