Types of Partners in LLC Companies
- A variety of partners can come together to form a successful LLC.businessman image by dinostock from Fotolia.com
An LLC, or limited liability company, is a state-based business entity that combines the liability protection of a corporation with the simplicity of a partnership. The structure of an LLC is generally more flexible than that of other business entities, and individuals and businesses can use LLCs to minimize state and federal taxes. According to how it is established, an LLC can be owned by one individual or by various partners. Multi-member LLC partners, called members, may be individuals or even other corporations. - LLCs may be formed with two or more individuals. The LLC operating agreement, similar to a corporation's bylaws, will define the percentage ownership of each individual. Members may choose to divide ownership according to the amount of capital invested by each individual when they form the LLC.
- Husband-and-wife partnerships in an LLC are a special case. First, many states treat husband-and-wife LLCs as sole proprietorships for taxation purposes. This condition usually simplifies taxes for the members. In addition, an LLC formed solely between spouses is very useful in case either spouse dies. Unlike other business entities where succession planning is more complicated, ownership of a husband-and-wife LLC usually passes easily to the surviving spouse absent a will.
- Sometimes corporations can be members in an LLC. A corporation may do this for a few reasons. First, a corporation may wish to keep a subsidiary business legally separate from its own operations. This arrangement could allow the parent corporation to maintain management control over the LLC, while still limiting the ultimate liability of the corporation for the LLC's actions. Further, given the relative ease of establishing an LLC, corporations frequently form them to facilitate mergers and acquisitions, using the LLCs to shift assets or as shell companies. Finally, the flexibility of an LLC's structure may give certain tax benefits to a corporation, depending on the individual case.
- Like corporations, other LLCs can become members in new LLCs. An LLC's reasons for doing this are very similar to a corporation's. An LLC member may derive tax benefits from forming a new LLC, depending on the situation. In addition, another LLC may offer an extra layer of liability protection to the original LLC.
