The limited liability company (LLC) has become a popular business form because of its limited liability protection for its owner. The S corporation also provides limited liability protection for its owner. What advantages does an LLC provide that are not available with an S corporation?
What will be an ideal response?
• The LLC is taxed as a partnership under the check-the-box rules. As such, the basic operating restrictions that are imposed on an S corporation do not apply to an LLC. These include, but are not limited to: a 100 shareholder limit; restrictions on the type of eligible shareholders; a single class of stock; and the limitation on amount of passive income that can be earned by an S corporation.
• The corporate-level taxes imposed on an S corporation, such as the built-in gains tax and excess net passive income tax, do not apply to an LLC.
• The loss limitation is larger for an LLC than for an S corporation because of the treatment of general debts incurred by the LLC under the partnership taxation rules.
• All states have enacted LLC laws, so that the problem with a lack of developed legal structure for handling general legal problems has disappeared. The application of basic legal principles to S corporations was no problem since in most cases they followed the basic rules for corporations.
You might also like to view...
Identify a true statement about the environmental legislation enacted in the 1970s.
A. It primarily addressed environmental concerns using tort law. B. It overestimated the influence that businesses can have in establishing a law. C. It focused mainly on providing compensation after the occurrence of pollution or any other environmental harm. D. It shifted the burden from those threatened with harm to those who would cause the harm.
According to Terpstra and David (1991), which of the following is not a characteristic of the ‘set of symbols whose meanings provide a set of orientations for members of a society’ and that constitute national culture:
a. inter-related b. shared c. random d. compelling
How do the tort theories of negligent product liability and strict product liability differ from each other? List and describe the elements an injured party must establish for recovery under each cause of action
A higher price/earnings ratio signifies a higher return on investment
Indicate whether the statement is true or false