Limited Liability Company Features
The limited liability company has become the preferred form of business organization for the vast majority of newly formed businesses. It offers the limited liability of a traditional corporation, combined with the flexibility of a partnership.
A limited liability company, or LLC, requires less formality and is taxed as a partnership, meaning that all of the profits and losses of the business pass directly through to the owners without being taxed at the level of the business. This is a substantial economic benefit to the owners.
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While pass-through taxation is also available to the shareholders of a corporation that is taxed as a Subchapter S Corporation (an S-Corp), there are limits for S-Corps that are not applicable under most LLC statutes. The most important of these limits is the requirement that the shareholders of an S Corporation be humans (as opposed to a business ) and that there can only be a single class of stock.
An LLC, meanwhile, will permit businesses to hold an interest as a member, and will also give the business the benefit of pass-through taxation. The ability to have more than one class of owners, such as a class established for employees, can be a key component of a limited liability company.
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