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Massachusetts Limited Liability Company Lawyer

Massachusetts Limited Liability Company Lawyer - silhouette of business people

A new development which is now accepted in all states is the entity known as the Limited Liability Company (LLC).

The purpose of the LLC is to provide business owners with the very favorable liability protection of corporations coupled with the informality and tax advantages available from partnerships.

If you or someone you know is interested in starting a limited liability company, contact our Massachusetts Limited Liability Company lawyer today!

An LLC is generally formed by a central filing with the Secretary of State. Unlike corporations, ownership is not evidenced by share certificates, but rather by an entry in the company books. Instead of corporate minutes and bylaws, the operation of the business is controlled through an Operating Agreement which is similar to a partnership agreement.

The LLC is a pass-through entity, like a partnership. The taxable income or loss is reported on the tax returns of the owners. This avoids the potential for double taxation which exists with a corporation. Although this same tax result can generally be achieved with an S Corporation, the LLC is not subject to many of the restrictions that apply to S Corporations. For example, the requirements that the S Corporation have no more than thirty-five shareholders; only one class of stock; and that the shares can only be held by a natural person or some types of trusts, do not apply to the LLC.

Any person or other entity is permitted as a member of the LLC. However, as with a partnership, there must be two or more individuals or legal entities involved. For instance, the members of the LLC can be composed of two corporations, an individual and a corporation, two trusts, a partnership and a trust, or any other permutation which can be imagined. Because of the degree of freedom which is permitted, many new and favorable strategies for business and personal financial planning can be achieved.

The LLC can also be administered and maintained without the rigid requirements which apply to corporations. The LLC has no formal hierarchy of directors and officers. The owners of the business are substantially free to manage the company and divide the profits and the ownership in any manner they choose.

The LLC also represents a significant improvement over the partnership as an entity for doing business or holding assets. As we have discussed, doing business in partnership form exposes each of the partners to personal liability for all obligations of the partnership. Even with a limited partnership, there is still a general partner with unlimited liability for all of the debts of the partnership.

In contrast, the LLC protects all of the owners of the business from liabilities associated with the company. None of the owners are personally responsible for any debts or claims against the business. As with a partnership, a creditor of a member of an LLC is not permitted to reach the assets of the LLC.

If you or someone you know needs help in starting a limited liability company, contact our Massachusetts Limited Liability Company lawyer today!

Strategies for Using the LLC

The LLC represents a very effective business planning tool in a wide variety of circumstances:

The LLC is an excellent alternative to a corporation to conduct your active business. The threat of double taxation is avoided and considerable flexibility and convenience can be achieved. Because the corporate formalities of minutes, bylaws, officers, directors, meetings etc. have been eliminated, it appears that a creditor of the LLC will not have the ability to “pierce the corporate veil” and establish personal liability on the part of a member of the LLC. In this manner, the LLC adds a level of security and certainty which exceeds that available from a corporation. In states, such as California, which impose a surtax on gross revenues, the disadvantage of the additional cost must be considered.

For asset protection and estate planning purposes, an LLC can be used as the General Partner of a Family Limited Partnership. Instead of husband and wife serving as General Partners, as in our usual case, an LLC composed of a husband and wife would be the General Partner of the Family Limited Partnership. This technique would allow you to obtain the benefits of the Family Limited Partnership without exposing either husband or wife, as individual General Partners, to the threat of lawsuits and the risk of personal liability for partnership debts.

The LLC is the best means of holding joint interests in real estate. If you own property with someone else as a joint tenant, tenant in common or in a partnership, you have individual liability for any claims against the property or the partnership. In addition, your interest in the property can be lost or jeopardized if your co-owner incurs any obligations. Instead, if property is held in an LLC, a claim against you, the company or your co-owner will not affect the property.

The LLC represents an exciting and powerful new form of business organization with advantages that cannot be achieved through any of the traditional arrangements. Although all of the technical ramifications have not yet been settled, the LLC should be given serious consideration for business, estate planning, and asset protection strategies.

If you or someone you know is interested in starting a limited liability company, contact our Massachusetts Limited Liability Company lawyer today!

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