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Limited Liability Companies

Limited Liability Company Overview

A limited liability company is a relatively recent development in business law. In most states, limited liability companies were first allowed in the early 1990s. The limited liability company seeks to blend some of the best features of a corporation and a partnership. From the corporation it takes its limited liability character and its separate business entity existence. From the partnership it takes the pass through taxation features offered by the IRS. (Alternately it may elect to be taxed as a corporation, though few elect this treatment). The limited liability company also offers organizational flexibility much like a partnership. The members of the company may agree to virtually any structure including the use of officers to govern the day to day operations. Those who run the corporation, however, are usually referred to as the managers of the company. Managers generally have the unlimited ability to bind the company, unless that ability is explicitly and publicly limited.

Depending on your particular circumstances, an S-corporation may sometimes provide better California tax outcomes than a limited liability company. You should discuss this carefully with your certified public accountant or other tax advisor.