Limited Liability Companies Order Form
 Limited Liability Companies (LLCs) are great for businesses that:
- Are being used to invest in appreciating assets such as real estate, stocks, bonds or other securities
LLCs allow you to:
- Have flow through taxation (i.e., the profits and losses flow through to the personal tax returns of the
LLC's Members), avoiding the double-taxation of C Corporations
- Protect the assets of the LLC from lawsuit judgments against individual Members
- Protect your family home and assets without losing the valuable IRS homeowner deduction
- If set up properly, to allow for estate-planning and succession to your children on a tax-free basis
through gifting
Instead of shareholders, a limited liability company (LLC) has members, who either operate the LLC directly or leave
it to be managed by a separate group of Managers, or Managing Members. Members and Managers are protected
from liability in the same way that officers, directors and shareholders of corporations are, which means that as long
as they are acting legally and in the LLCs best interests, they will not be found liable for debts or other liabilities
incurred by the LLC. The most that you can lose as a Member of an LLC is what you've put into it.
Most LLCs do not pay separate taxes and often don't even file tax returns. Like an S Corporation, the net profits of
an LLC are distributed to the Members in proportion to their individual ownership percentages. Members must then
declare and pay taxes on their individual share of the LLC's net income in the same way that S Corporation shareholders
do.
LLCs are ideal structures for holding real estate. They receive very favorable tax treatment with capital gains, which
makes them very attractive structures to hold real estate and other appreciating assets.
LLCs also have a special legal protection in many states that corporations do not. If you are sued personally and own
shares in a corporation, those shares can be seized and sold by a judgment creditor. That means you could lose
control over all of the assets in that corporation. But an LLC, on the other hand, receives special legal protection in
many states that prevents a creditor from seizing a Member's ownership interests. The assets in that LLC stay safe.
Not all states offer this level of protection though, so you might want to discuss things ahead of time with your legal
advisor to see what the status of LLC law is in your state.
If you have a money partner and a sweat equity partner in your real estate ventures, then an LLC can be the best
vehicle to reapportion profits and losses amongst members in whatever way you agree upon, even if it's different from
your ownership percentages. Corporations don't have this flexibility.
Because LLCs are flow-through tax entities though, it can be tricky to have non US-based members. That's because
the LLC will have to withhold a portion of their profits to cover US income taxes. Don't take this as a complete bar
to having non US-based members, but get some advice from your tax advisor on the best way to structure your
business if you find yourself in this scenario.
Limited Partnerships Order Form
 Limited Partnerships (LPs) are great for businesses that:
- Are being used to invest in appreciating assets such as real estate, stocks, bonds or other securities
Using an LP allows you to:
- Have flow through taxation (i.e., the profits and losses flow through to the personal tax returns of the
limited partners)
- Protect the assets of the LP from lawsuit judgments against individual limited partners
- Protect your family home and assets without losing the valuable IRS homeowner deduction
- If your LP is set up with a corporate general partner, you can both protect the general partner from
personal liability and provide great benefits, such as medical and dental plan coverage, to your family
A limited partnership (LP) is another ideal structure to hold real estate. It is a protected structure made up of a
General Partner that has full control over the operations of the LP, and Limited Partners, who are passive owners,
in the same way that shareholders are passive owners of a corporation. It is a flow-through tax entity, which means
that the net profits are passed through the LP to the limited partners, who pay tax on their individual share at their
own personal tax rates.
The General Partner is very powerful, but that power comes with a price. General Partners remain personally liable for
the debts of an LP, something that does not happen with any other type of proper business structure. It is for this
reason that we recommend using another business structure to act as the General Partner, rather than naming an
individual to this role. But using a C Corporation as a General Partner can also have a happy upside, because all of
its employees and officers, and their respective defendants can receive tax-free health-care and pension benefits!
An LP is also an excellent estate-planning vehicle. Limited Partners cannot vote to remove a General Partner, even
if they have majority ownership of the LP. Parents who own the corporate General Partner can maintain control over
the assets and operations of the LP, even after they have gifted or transferred majority ownership to their children.
Finally, LPs offer the same type of asset protection that LLCs do. In most states an individual's Limited Partnership
Interests (the ownership units) are not subject to seizure and sale by a judgment creditor, meaning that the
underlying assets of the LP also remain safe.
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