The emerging use of the limited liability company

Article Abstract:

Many corporations are forming limited liability companies (LLC) to avoid double taxation of corporate income, once for the corporation and once for the shareholder distributions, because LLCs are treated as partnerships under federal tax law. The LLCs, created by state law, have inconsistent requirements among different states but are treated as partnerships as long as the laws do not allow a preponderance of corporate attributes. Therefore, corporations can retain the S corporation designation while corporate income is only taxed once at the individual level.

Corporate taxes, Corporations

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Corporate governance, limited liability companies and the IRS's view of centralized management

Article Abstract:

The IRS revenue rulings 93-5 and 93-6 raise concerns about the classification of limited liability companies (LLC) as partnerships for taxation. The rulings support an automatic finding of centralized management if an appointed manager is used in the LLC, making the entity taxable as a corporation. The state LLC acts are specifically designed to prevent corporate attributes in the LLCs and so these rulings are disturbing. LLC taxpayers should appoint an executive equity member to manage the companies to avoid possible taxation as a corporation.

Management

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Assessing the long-awaited LLC classification guidelines

Article Abstract:

The IRs has released Revenue Procedure 95-10 to address partnership taxation issues arising under state limited liability company laws and to reduce the need to apply for individual IRS guidance before claiming partnership tax status. The release details how to apply the corporate characteristics test to limited liability companies. The IRS has determined that managers at limited liability companies should be treated like general partners in the limited partnership context. The standards for centralization of management have also been relaxed.

United States, Tax administration and procedure, Tax administration

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