Basics of LLCs

Posted on: December 18, 2014
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If you are considering creating an LLC, an Arlington business attorney can explain the legal consequences of this choice. Here are a few concepts that you should be familiar with.

Ownership

LLC owners are referred to as members. The LLC provides complete freedom to members to distribute ownership rights to the LLC without having to consider how much capital contribution a member makes.

Distributions

Members can receive periodic distributions as outlined by the operating agreement. The operating agreement may provide for certain members to receive a higher amount of the distribution, or it may provide that all members get an equal share.

Taxation

One of the more complicated aspects of LLCs that an Arlington business lawyer may explain is the issue of taxation. An LLC may choose to be taxed like a sole proprietorship or like a corporation. If it is taxed as a corporation, only salaries are subject to these taxes. If taxed as a sole proprietorship, salaries and profits are taxed. The default classification is to treat the LLC as a single taxation. The distributions are subject to employment tax. However, LLC members who actively participate in the business can deduct their operating losses against their ordinary income.

Operations

An Arlington business attorney can explain that LLCs do not have to comply with the same type of operations as corporations, such as holding regular meetings or keeping corporate minutes.

If you would like more information about establishing an LLC, contact Paul S. Schleifman by calling (703) 528-1021.