Creating a business that is a Limited Liability Company entity is an effective estate planning tool. An LCC (Limited Liability Company) is recognized in every state in America and provides business operators with the same benefits as creating a corporation, while also allowing them to be taxed as a partnership. What this does is allow business operators to avoid some of the taxation issues that are associated with being referred to a corporation. With a LCC, business owners can gift certain aspects of their business to benefactors and family members when they pass away. Thus, allowing their families to benefit upon their death and avoid extensive taxation on the estate.
How is a Limited Liability Company Defined?
Limited Liability Companies are a new type of business entity. In order to form a legitimate LLC, one must file a “article of organization” with the Secretary of State within the state where you intend to form your business. The existence of the LLC is then governed by a document known as an “operating agreement”. This document is very similar to a partnership agreement that would bylaw a corporation, meaning that individual’s or other entities who invest into the LLC are considered “members” and therefore become similar to corporate shareholders.
Why Choose an LCC for your Business Plan in San Diego
There are two features that make a Limited Liability Company unique. Firstly, all members are able to benefit from the businesses status as an LLC. This means that all parties are exempt from personal responsibility beyond their initial investment capital or commitment to the company. Secondly, an LLC is able to benefit from the income tax-flow through the attributes of a partnership. Essentially, this means that the LLC will not be double taxed if it changes ownership.
Within California any individual can create an LLC for lawful reasons with the exception of insurance or banking purposes.
Some Advantages of Forming an LLC:
Avoid Double Taxation
Avoid Corporate Regulatory Rules (Such as annual shareholder meetings)
Avoid Operation Restrictions
Be unrestricted in the amount of members in the LLC
Provides limited liability protection for all members
Who Should Consider Forming A Limited Liability Company?
There are various types of businesses that would benefit from becoming an LLC. These include businesses that are operated with both limited and general partnerships. Any business whose operators wish to limit the liability of general partners or limited partners, or who are seeking more participation from their limited partners in the day to day management of their business should consider becoming a limited liability company. Turning your business into a legitimate LLC is also a good idea if you wish to be held to fewer reporting requirements and formalities or to increase the amount of shareholders in your company.
Estate Planning and Limited Liability Companies: From an estate planning perspective creating an LLC can provide three valuable protections as well as countless tax saving strategies for individuals who are inheriting LLC Companies. These include:
Help transfer asset gifts
Help with the transfer of properties
Allow for restrictions on LLC interests for tax purposes
LLC’s and Family Limited Partnerships
If you are currently in the process of restructuring your estate to limit the eventual impact of a lawsuit or other attacks on your financial security then, you may want to consider implementing an LLC in conjunction with a Family Limited Partnership (FLP). By doing this you can protect your assets by placing them into the FLP and out of the reach of creditors. Doing this also allows you to designate a general partner within your LLC as well as your FLP who will oversee the management of your company when you pass. This a good way to maintain control over what happens to your LLC and its assets.
To Find Out more About the Benefits of Both Limited Liability Companies and Family Limited Partnerships in regards to business planning and estate planning contact the Law Office of Ronald R. Webb today!
Life Insurance Policies and Limited Liability Companies
Very often the largest part of an individual’s estate is their life insurance policy. However, it is not uncommon for individuals to leave their life insurance assets in an estate, which then increases the amount that their benefactors are taxed. If you take the time to properly structure your LLC you can create an opportunity where your life insurance policy is distributed to the company therefore saving the benefactor tax dollars but still allowing them to be gifted the financial assets.
What Else Do You Need To Know About LLC’s?
The business entity of a Limited Liability Company is an extremely helpful tool when dealing with estate planning as well as business planning concerns. The LLC provides the same benefits as a corporation without the same high-level of regulation. When an individual who operates a business is looking into planning their estate they should consider creating an LLC. If you still aren’t certain as to whether or not this would be a beneficial move for you- you should consult an experienced business planning attorney like Ron Webb who will provide you with the information that you need in order to make an informed decision.
Contacting San Diego Attorney Ronald R. Webb
If you are looking for more information about business planning and forming a Limited Liability Company, we have the skills and legal resources to aid you. You can contact our legal firm to schedule a consultation at any time. We provide extended hours that include evenings and weekends for your convenience, meeting you in your home or in our offices by appointment.
The Law Offices of Ronald R. Webb is dedicated to providing innovative, client-centered representation throughout San Diego, including the communities of Del Mar, La Jolla, La Mesa, El Cajon, Spring Valley, National City, Kearney Mesa, Encinitas, Carlsbad, Oceanside, San Marcos, Escondido, Rancho Santa Fe, Vista, Solona Beach, Coronado, Ocean Beach, Hillcrest, Mission Valley, University City, Del Sur, Rancho Bernardo, Rancho Penasquitos, La Costa