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ASSET PROTECTION LIMITED LIABILITY COMPANIES A limited liability (“LLC”) is a non-corporate business entity, in which all members have limited liability protection, in which all members can participate in management control, and which, if appropriately structured, is taxed as a partnership rather than a corporation for federal income tax purposes. By combining limited personal liability with partnership tax classification, the LLC can provide advantages, which are unavailable to corporations, partnerships or limited partnerships, thereby affording investors the latitude to participate in business ventures. Additionally, the LLC may be an appropriate vehicle for real estate investments because it combines liability protection with favorable partnership tax treatments. Although real estate ownership creates potential liability under mortgages, leases and other contracts, environmental laws and other laws real estate investors traditionally have avoided using corporations because they have considered taxation on in-kind contributions of real estate to be disadvantageous and because they have desired flow-through treatment of losses, enhanced by the increased basis provided through debt financing. Accordingly, a LLC, if appropriately structured to be classified as a partnership for federal income tax purposes, is permitted to allocate tax items of income, gain losses, deductions, and credits among its members in accordance with its “partnership agreement” (i.e., operating agreement or regulations). NEXT
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