Limited Liability Companies LLC

Limited Liability Companies (LCC) are a cross between sole proprietorships/general partnerships and corporations.  A limited liability company  allows owners to limit their liability for the entity’s debts and normally passed through to the owners as if it were a partnership.  However, unlike a general partnership, there is no requirement that at least one general partner be liable for the debts and obligations of the partnership.  Owners of the LLC are typically referred to as members. 

Advantages of Setting up Your Business as an LLC

• Pass-through taxation: No double taxation because profits are taxed at the member level.

• Protection of personal assets: Members are protected from liability for acts and debts of the LLC.

• Tax flexibility: LLC can elect to be taxed as a sole proprietor, partnership, S-corp or corporation.

• Ability to be set up with single owner:  The LLC can be single owner.

• Few record-keeping requirements: No requirement for annual general meeting or board of directors.

• Health insurance:  The managing member of an LLC can deduct 100 percent of the health insurance premiums he or she pays--up to the extent of their pro-rata share of the LLC's net profit.

• Tax treatment: The profits or losses of the business pass directly through to the owner's personal income tax return, Form 1040. The LLC files a Form 1065, and then lists each member's taxable profit on Form K-1. The bottom-line profit of the business is not considered to be earned income to the members, and therefore is not subject to self-employment tax for non-managing members.

Disadvantages of Setting up Your Business as an LLC

• Inconsistent treatment: Due to a lack of uniformity among LLC statutes in the U.S., if a member wants to operate their LLC outside Minnesota, they may not receive consistent treatment.

• Taxable profits:  Each member’s pro-rate share of profits represents taxable income.

• Employment:  As a member of an LLC you are not allowed to pay yourself wages, so members won’t enjoy the privileges of unemployment benefit, nor will they be paying into social security.

• Difficulty in raising capital: Investors may not be comfortable investing in a company without shareholders or a public offering.

• Self-employment tax: The manager’s share of the profits is subject to the self-employment tax
  Minnesota residents may set their business up as a Minnesota Limited Liability Company (LLC) by filing Articles of Organization along with a $135.00 filing fee.  Minnesota’s Secretary of State reviews the filing and must approve the articles of organization.  Additionally, Minnesota requires annual renewal once a year.  Klun can help you form you limited liability company and draft articles of organization to meet Minnesota law.  Call us today at (877) 365-3221 to set up an appointment to discuss your limited liability company. 

Minnesota residents may set their business up as a Minnesota Limited Liability Company (LLC) by filing Articles of Organization along with a $135.00 filing fee.  Minnesota’s Secretary of State reviews the filing and must approve the articles of organization.  Additionally, Minnesota requires annual renewal once a year.  Klun can help you form you limited liability company and draft articles of organization to meet Minnesota law.  Call us today at (877) 365-3221 to set up an appointment to discuss your limited liability company. 
Minnesota residents may set their business up as a Minnesota Limited Liability Company (LLC) by filing Articles of Organization along with a $135.00 filing fee.  Minnesota’s Secretary of State reviews the filing and must approve the articles of organization.  Additionally, Minnesota requires annual renewal once a year.  Klun can help you form you limited liability company and draft articles of organization to meet Minnesota law.  Call us today at (877) 365-3221 to set up an appointment to discuss your limited liability company.