Limited Liability Companies

Limited liability companies provide the personal liability protection of a corporation with the tax benefits of a partnership.  They're more flexible, require less paperwork, with fewer government regulations than corporations.  They also provide the benefit of pass-through taxation.   Owners of an LLC are called members.  Members may be individuals, corporations, other LLCs, and foreign entities.  There is no maximum number of members. “Single member” LLCs, those having only one owner, are also permitted.  Banks, insurance companies and nonprofit organizations cannot be LLCs. 

Single Member LLCs

If the only member of the LLC is an individual, the LLC’s income and expenses are reported on Form 1040, Schedule C, E, or F.  If the only member of the LLC is a corporation, the LLC’s income and expenses are reported on the corporation’s return (Form 1120 or 1120S).  If you file as a corporation Form 8832, Entity Classification Election must be filed.

Multiple Member LLCs 

When the limited liability company has two or more members, they should execute an operating agreement that defines the relationship between the company and its members and determines distribution and voting rights.   Most LLCs with more than one member file a partnership return, Form 1065. If you file as a corporation, Form 8832, Entity Classification Election must be filed.

To create a Limited Liability Company, Articles of Organization are filed with the Bureau of Commercial Services, Corporation Division, at (517) 241-6400.   Information is also available online at the Corporation Division Web Site along with copies of forms, statutes, and publications.

Limited Liability Company