Limited Liability Companies
The Limited Liability Company (LLC) provides a relatively new way of doing business that combines the advantages of a partnership and a corporation. A business can be conducted in a number of forms, such as a partnership, a regular corporation, or an S corporation. Doing business as a partnership has many tax advantages. Income is taxed only once, and there is great flexibility in how income and deductions are passed through to the partners. But the partners' personal assets are put at risk, since each general partner is personally liable for the partnership debts and obligations. Corporations don't have the liability problem, since shareholders aren't responsible for debts of the corporation. However, a corporation's income may be taxed twice, once when the corporation earns it and once when it is distributed to the shareholders in the form of dividends. Electing to be an S corporation avoids double taxation, but S corporations have many restrictions as to the number and type of shareholders, classes of stock, ownership of subsidiaries, etc..