Clients starting a new business face several choices regarding the appropriate entity. Corporations and partnerships are the traditional options, however since the mid 1990’s a popular option is a hybrid of the two, a limited liability company (LLC).
The LLC combines the limited liability aspects of a corporation with the pass through of taxation benefits of a partnership.
A unique and valuable option with the LLC is the ability of the owner of a minority interest to control the LLC through provisions in the operating agreement. This option can allow families to pass valuable assets to family members at significant discounts while still retaining control.
As a general rule an LLC operating agreement can be drafted in any way the owners choose, thus providing flexibility to meet the needs of all parties.
Although an LLC may be the right choice, other options should be considered. An S-corporation can provide many of the same attributes, but avoid the self employment tax. Anyone making the choice of an entity should consult their tax advisor along with their attorney.