Limited Liability Company

1. Limited Liability Company By, Farryl Groder, Lauren Chun, Sarah Hyman, Grant Harriman, and Hannah Gross

2. What is an LLC? An LLC is not a corporation, it’s a company that provides limited liability to its owners. They have characteristics of both corporations and partnerships/ sole proprietorships. The primary characteristic shared with a corporation is limited liability, and with a partnership is the availability of pass-through income taxation (the income of the company is treated as the income of the investors/owners.)

3. Why form an LLC? • LLC’s get lawsuit protection, pay less taxes, and employee benefits. • They have broader range of powers than that of a sole proprietorship, such as separate liability and the ability to hold personal property. • There is a greater source of capital for LLC’s than for partnerships and proprietorships.

4. Advantages - An LLC can be taxed as a sole proprietor, partnership, S corporation or C corporation - Less paperwork and record keeping than a corporation - Each owner (member) of the LLC has a limited liability and is protected from some or all of the liability for the acts and debts of the company - No double taxation; also known as “pass-through taxation” - If an LLC has multiple members and elects to be taxed a partnership it can allocate each members’ distributive share of income, gain, loss, deduction, or credit via the company operating agreement - Corporations can be owners of an LLC along with individuals

5. Drawbacks • Legal status varies from state to state, complicating taxes and management • Clear operating agreement among all partners is essential to smooth operation • If members die or withdraw the LLC ends • Can be difficult to determine who has power to enter into agreements on behalf of the LLC

6. Examples of LLCs AOL during its ownership by Time Warner (2001-2008) Chrysler since 2009