THE COMPLETE GUIDE TO LIMITED LIABILITY COMPANIES

Transcription

1 THE COMPLETE GUIDE TO LIMITED LIABILITY COMPANIES By WAYNE A. HAGENDORF PART ONE CHARACTERISTICS OF A LIMITED LIABILITY COMPANY CHAPTER ONE WHAT IS A LIMITED LIABILITY COMPANY? I. DESCRIPTION II. HISTORY OF THE LIMITED LIABILITY COMPANY III. COMPARISON TO OTHER BUSINESS ENTITIES CHAPTER ONE-A SOLE PROPRIETORSHIP VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN SOLE PROPRIETORSHIPS AND LLCs III. CONVERSION FROM A SOLE PROPRIETORSHIP TO AN LLC V. SOLE PROPRIETORSHIP ADVANTAGES CHAPTER TWO PARTNERSHIP VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN PARTNERSHIPS AND LLCs III. CONVERSION FROM A PARTNERSHIP TO AN LLC V. PARTNERSHIP ADVANTAGES CHAPTER THREE LIMITED LIABILITY PARTNERSHIP VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN LLPs AND LLCs III. CONVERSION FROM AN LLP TO AN LLC V. LIMITED LIABILITY PARTNERSHIP ADVANTAGES KNOWLES PUBLISHING PAGE 1

2 CHAPTER FOUR LIMITED PARTNERSHIP VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES III. CONVERSION FROM A LIMITED PARTNERSHIP TO A LIMITED LIABILITY COMPANY V. LIMITED PARTNERSHIP ADVANTAGES CHAPTER FIVE CORPORATION VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN CORPORATIONS AND LIMITED LIABILITY COMPANIES III. CONVERSION FROM A CORPORATION TO A LIMITED LIABILITY COMPANY V. CORPORATION ADVANTAGES CHAPTER SIX S CORPORATION VERSUS LIMITED LIABILITY COMPANY II. DIFFERENCES BETWEEN AN S CORPORATION AND A LIMITED LIABILITY COMPANY III. CONVERSION FROM AN S CORPORATION TO A LIMITED LIABILITY COMPANY V. S CORPORATION ADVANTAGES PART TWO FORMATION OF A LIMITED LIABILITY COMPANY CHAPTER SEVEN ESTABLISHING A LIMITED LIABILITY COMPANY I. CREATION BY STATE STATUTE II. ELEMENTS OF FORMATION III. PROCEDURE IV. MEMBERSHIP V. SUMMARY CHECKLIST FOR ESTABLISHING A LIMITED LIABILITY COMPANY I. IN GENERAL II. FEDERAL TAX TREATMENT III. STATE TAX TREATMENT IV. SUMMARY CHAPTER EIGHT FLOW-THROUGH TAX TREATMENT KNOWLES PUBLISHING PAGE 2

3 CHAPTER NINE CAPITAL CONTRIBUTIONS I. CONTRIBUTIONS TO THE LLC II. LLC DEBT III. SECURITY ISSUES IV. SUMMARY PART THREE OPERATION OF A LIMITED LIABILITY COMPANY I. THE ENTITY CONCEPT II. MEMBERS INTERESTS III. TRANSFER OF A MEMBER S INTEREST CHAPTER TEN THE LIMITED LIABILITY COMPANY ENTITY CHAPTER ELEVEN THE OPERATING AGREEMENT II. FORCE AND EFFECT III. CONTENTS OF THE OPERATING AGREEMENT IV. AMENDING, ALTERING, OR REPEALING THE OPERATING AGREEMENT V. SUMMARY CHECKLIST FOR OPERATING AGREEMENT CHAPTER TWELVE GOVERNANCE OF THE LIMITED LIABILITY COMPANY II. MANAGEMENT BY MEMBERS III. MANAGEMENT BY MANAGERS IV. FINANCES V. SUMMARY CHAPTER THIRTEEN LIABILITY ISSUES I. LIABILITIES OF THE LIMITED LIABILITY COMPANY II. LIABILITIES OF MEMBERS III. LIABILITIES OF MANAGERS IV. INDEMNIFICATION V. SUMMARY KNOWLES PUBLISHING PAGE 3

4 PART FOUR TERMINATION OF A LIMITED LIABILITY COMPANY CHAPTER FOURTEEN METHODS OF TERMINATION II. VOLUNTARY TERMINATION III. INVOLUNTARY TERMINATION IV. JUDICIAL OR ADMINISTRATIVE TERMINATION V. MERGERS AND CONSOLIDATIONS VI. SUMMARY I. EFFECT OF TERMINATION ON LLC BUSINESS II. DISTRIBUTION OF ASSETS III. PROCEDURE TO TERMINATE THE LLC IV. REVOCATION OF DISSOLUTION V. SUMMARY CHAPTER FIFTEEN CONSEQUENCES OF TERMINATION PART FIVE TAXATION OF A LIMITED LIABILITY COMPANY CHAPTER SIXTEEN INTRODUCTION TO THE TAXATION AND FORMATION OF THE LIMITED LIABILITY COMPANY TO THE LLC II. FORMATION OF THE LLC III. BASIS OF LLC INTEREST TO MEMBER IV. BASIS OF PROPERTY CONTRIBUTED BY A MEMBER TO AN LLC V. CONVERSION OF EXISTING BUSINESS TO AN LLC VI. SUMMARY CHAPTER SEVENTEEN THE CHANGES MADE BY THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003 AND THE 2010 AND 2012 TAX RELIEF ACTS EXTENDING MOST OF THE BUSH TAX CUTS I. INTERNAL REVENUE CODE 702 II. REDUCTION OF INCOME TAX RATES III. INCREASE OF THE ALTERNATIVE MINIMUM TAX EXEMPTION IV. LONG TERM CAPITAL GAINS TAX REDUCED V. TAX ON QUALIFIED DIVIDENDS CONSIDERED NET CAPITAL GAINS AND REDUCED TO 15% VI. CONFERENCE REPORT FOR CAPITAL GAINS AND DIVIDEND PROVISIONS VII. INCREASE IN THE SECTION 179 DEPRECIATION DEDUCTION VIII. INCREASE IN FIRST YEAR BONUS DEPRECIATION KNOWLES PUBLISHING PAGE 4

5 I. THE ENTITY CONCEPT II. THE LLC TAX YEAR III. THE COMPUTATION OF LLC INCOME IV. TAX ELECTIONS V. THE LLC MEMBER S DISTRIBUTIVE SHARE VI. FAMILY LLCs VII. LOSSES VIII. BASIS OF A MEMBER S INTEREST IX. SUMMARY CHAPTER EIGHTEEN TAXATION OF THE LIMITED LIABILITY COMPANY (PARTNERSHIP CLASSIFICATION) OPERATIONS CHAPTER NINETEEN DISTRIBUTIONS FROM AND TRANSFERS OF AN INTEREST IN AN LLC WHICH POSSESSES UNREALIZED RECEIVABLES AND INVENTORY II. THE COLLAPSIBLE LLC III. THE GENERAL RULES COVERING UNREALIZED RECEIVABLES AND INVENTORY (SECTION 751) IV. UNREALIZED RECEIVABLES V. INVENTORY VI. DETERMINATION OF GAIN OR LOSS ON UNREALIZED RECEIVABLES AND INVENTORY VII. NOTIFICATION REQUIREMENTS FOR SELLING MEMBER AND LLC VIII. SUMMARY CHAPTER TWENTY DISTRIBUTIONS FROM AN LLC II. CURRENT DISTRIBUTIONS OF CASH AND MARKETABLE SECURITIES NOT IN EXCESS OF BASIS III. CURRENT DISTRIBUTIONS OF CASH AND MARKETABLE SECURITIES IN EXCESS OF MEMBER S BASIS IV. CURRENT DISTRIBUTIONS OF PROPERTY OTHER THAN CASH AND MARKETABLE SECURITIES V. THE MEMBER S TREATMENT OF DISTRIBUTIONS IN LIQUIDATION OF A MEMBER S INTEREST VI. TREATMENT OF DISTRIBUTIONS IN LIQUIDATION OF A MEMBER S INTEREST VII. CHARACTERIZATION OF PAYMENTS TO A MEMBER VIII. DISTRIBUTION IN COMPLETE LIQUIDATION OF THE LLC IX. SUMMARY KNOWLES PUBLISHING PAGE 5

6 CHAPTER TWENTY-ONE PURCHASE OR SALE OF AN LLC MEMBER S INTEREST (PARTNERSHIP CLASSIFICATION) I. TAX EFFECTS ON SELLER II. TAX EFFECTS ON PURCHASER III. TAX EFFECTS ON REMAINING MEMBERS IV. SUMMARY CHAPTER TWENTY-TWO UNIFIED PARTNERSHIP (LLC) AUDIT PROCEDURES I. TEFRA II. LLCs SUBJECT TO THE UNIFIED AUDIT PROCEDURES III. THE CONSISTENCY REQUIREMENT IV. THE TAX MATTERS PARTNER (TMP) V. PARTNERSHIP (LLC) ITEMS VI. THE INITIAL AUDIT PROCEDURE VII. THE AUDIT VIII. THE APPEALS CONFERENCE IX. THE FINAL PARTNERSHIP ADMINISTRATIVE ADJUSTMENT (FPAA) X. SUMMARY APPENDIX I AGREEMENTS APPENDICES APPENDIX II MEMBER LIABILITY TO THIRD PARTIES STATE-BY-STATE ANALYSIS APPENDIX III CHARGING ORDERS STATE-BY-STATE ANALYSIS APPENDIX IV NEW LIMITED LIABILITY COMPANY STATUTES BY STATE APPENDIX V STATE STATUTES APPENDIX VI SELECTED PROVISIONS OF THE INTERNAL REVENUE CODE AND REGULATIONS APPENDIX VII TABLE OF CASES INDEX KNOWLES PUBLISHING PAGE 6