Law & Accounting Offices of Stanley F. Bronstein
Scottsdale, AZ 85260
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A limited liability company is a business or organization formed by one or more persons.
It has rights and liabilities separate from those of the persons involved. Persons can be not only individuals, but also other entities.
Limited Liability Companies ( LLCs) can elect to be taxed as either a partnership, a corporation or as a disregarded entity if they are a single member LLC (which means they have only one owner / member). Generally speaking, most US-created LLCs may avoid the double taxation pitfalls of the corporate income tax rules automatically, unless they specifically elect to be taxed as a corporation or as a S corporation.
Under the law, a LLC has many of the same rights and responsibilities as an individual. LLCs may buy, sell and own property. They are allowed to enter into leases and contracts, and file lawsuits. LLCs can be prosecuted and fined if they break the law.
One advantage of forming a LLC is that a LLC can exist indefinitely, beyond the lifetime of any one shareholder.
Each state has the power to promulgate laws relating to the creation, organization and dissolution of LLCs. Anyone considering forming a LLC should hire a law firm that is familiar with both federal and state laws governing LLCs.
Many of the companies advertising on the internet wanting to form your LLC will simply take your information (and your money) and form the entity. They offer no legal or tax advice and when they give you documentation, they will often tell you to consult with your legal or tax advisor. We find this to be ironic, as we believe it is the job of your legal and tax advisor to form the LLC for you in the first place. That way you could have the assistance of a knowledgable advisor from the very beginning, and find out the legal and tax consequences of your proposed actions before you make a mistake or form the wrong type of entity.