Why Are Limited Liability Companies Attractive?
The existence of LLCs is driven by both tax and business considerations. Flow Through Tax Treatment. The goal is to have an entity which has the corporate characteristic of limited liability and which has flow through tax characteristics, such that income is taxed only once, i.e. at the owner level, not twice, as is the case with regular corporations, at both corporate level and owner level. Advantages over S Corporations. LLCs are in large measure a response to limitations on the availability of S corporations: • LLCs are not limited, like S corporations, to one class of shareholder. • LLCs are not limited, like S corporations, to U.S. individuals, estates certain trusts and certain entities as shareholders. • LLCs can have preferred interests and participating debt. • LLCs are not limited, like S corporations, to 75 shareholders. • LLCs have flexibility in allocations, unless the strict ratable daily inclusion methodology of S corporations. It is questionable if there would be a need
