LLC’s, LLP’s, LLP’s, and other entities
Limited Liability Company (LLC)
- Creation of entity by contract.
- Maximum Member/Manager contractual flexibility.
- Full shield in Georgia: tort and contract.
- Generally, avoid continuity of life and free transferability of interests; can’t have more than two corporate characteristics.
- Check the Box Proposed Regulations (May, 1996).
- Lack of precedence., But in all 50 states.
- Florida, Pennsylvania, and Texas – maybe avoid because of entity level income taxes.
- Georgia imposes state income tax withholding on distributions to nonresidents.
“A person who is a member, manager, agent, or employee of a limited liability company is not liable, solely by reason of being a member manager, agent, or employee of the limited liability company, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent or employee of the limited liability company, whether arising in contract, tort, or otherwise.” O.C.G.A. 14-11-3-3(1994).
Limited Liability Partnership (LLP)
- General partnership.
- Election filed with Superior Court of partnership office.
- Full shield in Georgia: tort and contract.
- Georgia: corporate style liability protection for partners.
“…a partner in a limited liability partnership is not individually liable or accountable either directly or indirectly by way of indemnification, reimbursement, contribution, assessment, or otherwise for any debts, obligations, or liabilities of or chargeable to the partnership or another partner, whether arising in tort, contract, or otherwise, that are incurred, created, or assumed while such partnership is a limited liability partnership, solely by reason of being such a partner or acting or omitting to act in such capacity or otherwise participating in the conduct of the activities of the limited liability partnership.” O.C.G.A 14-8-15(b)(1995).
Limited Liability Limited Partnership (LLLP)
- Family Limited Partnerships (FLP)
- Shift family taxable income to reduce income taxes.
- Transfer assets out of your estate at a discount.
- Expand asset protection from creditors (charging order).
- Valuation Discounts:
- Lack of marketability, minority interest, etc.
CORPORATIONS
- Limited Liability
- Continuity of Life
- Centralization of Management
- Free Transferability of Interests
- Protect shareholders from liability for the acts or omissions of other shareholders, officers, directors, employees or agents of the corporation.
C Corporation
- 15% income tax for first $50,000 then 25% then 34% then 35%.
- Avoid piercing the “corporate veil” generally a jury question.
- Tax free medical and disability insurance, annual physicals.
- Medical Reimbursement Plans – can’t discriminate.
- $50,000 group life insurance.
- Maximum accumulated earnings of $250,000 ($150,000 for personal service corporations). Georgia:
- Professional Corporations (1970). Georgia: Statutory Close Corporations (1989).
S Corporation
- Health insurance premium 30% deductible for more than 2% SH.
- 100 shareholders (04 Act[was 75]).
- One class of stock.
- Can have qualified Subchapter S Trusts.
- Can be tax exempt organization but not charitable remainder trust.
- No non resident aliens.
- No qualified incentive stock options.
- Can’t contribute to FLP.
- File Form 2553 by March 15 or 15th day of the third month.
- Georgia imposes state income tax withholding on distributions to nonresidents.
Sole Proprietorship
- Unlimited and unrestricted liability.
- Health insurance premium 30% deductible in 1996.
- 39.6% top individual income tax rate.
- 15.30% social security tax through $62,700 in 1996.
- 2.9% Medicare portion has no ceiling.
Partnerships
- All Partners are personally liable, jointly and severally, for the debts and obligations of the partnership. Form 1065 and K-1s; pass through entity.
- Body of established law.