LLC Taxation As Partnership
HOW LLC'S WORK New Mexico and Wyoming offer the best choices for obtaining an LLC. Here are LLC basics: LLC= Taxation As Partnership + Limited Liability
Partnerships are “pass-through” entities for tax purposes. This means that partnership income, deductions and other items passes through the partnership directly to the partners. Accordingly, each partner takes into account his or her share of partnership income, deductions and other items in determining the partner’s individual tax liability.
|Partnerships have partners.|
Limited liability companies (LLC) have members. The ownership in the LLC is called the “member interest.”
If a judgment is awarded against the LLC itself, it may be levied, and LLC’s property seized or sold in payment. If, however, a judgment is awarded against a member, to the extent that the operating agreement so states, distribution usually cannot be compelled to satisfy a member’s judgment debt. Creditors have to satisfy themselves with a “charging order.” This gives them the rights to any distributions made by the LLC to that particular member, but little else.
LLC’s are taxed as a corporation or as a partnership. Taxation as a partnership is the default.