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About limited liability companies

| Oct 20, 2018 | Business Formation |

Louisiana residents who are considering which one of the various types of legal business entities to use for their enterprise may want to consider creating a limited liability company, or LLC. An LLC is a business structure that is permitted by state law.

Individuals who own an LLC are referred to as members of the LLC. The majority of states have no limits on ownership; this means that members can be individuals as well as other LLCs, corporations or foreign entities. There is no limit on the number of members an LLC can have. The state statutes of most states also permit the creation of single-member LLCs, or LLCs that have just one member.

The number of members in an LLC and the elections made by the LLC will determine how the Internal Revenue Service will treat the LLC for the purposes of federal income taxes. The IRS may treat an LLC as a disregarded entity, or part of the owner’s tax return. LLCs can also be treated as partnerships or corporations.

Domestic LLCs that have a minimum of two members are considered partnerships by the IRS unless Form 8832 has been filed and the LLC elects to be taxed as a corporation. LLCs with just one member are treated as disregarded entities that are separate from the owner for the purposes of income tax, but they can choose to be treated as corporation. It should also be noted that single-member LLCS are treated as separate entities with regard to certain excise taxes and employment taxes.

An attorney who practices commercial law may assist entrepreneurs with business formation tasks, including creating the legal entities under which their business will operate. The attorney may advise of which documents should be submitted to the IRS to ensure that the business entity is taxed as it should be.