Limited Liability Companies are the relative newcomer to the field of corporate entities. The LLC first began in Wyoming and Florida in the 1970’s. The purpose was to create a corporate structure, which had the benefits of a corporation, without the downside of double taxation. Prior to the LLC this was accomplished by using a subchapter S election with a traditional C-corporation; however, S-Corps have significant restrictions and are therefore difficult to use, particularly in conjunction with other planning.
With the introduction of the LLC came a true hybrid with essentially all of the benefits of the Corporation with none of the S-Corp restrictions or the double tax of the C-Corp.
The Limited Liability Company’s primary role is to compartmentalize “risky” assets that should not be directly mixed with safe assets held by the AMLP. Real estate, rental properties, boats, and airplanes are all best held within an LLC to insulate owners and other valuable property from these risk-generating assets.
The LLC is normally owned 100% by the client’s Asset Management Limited Partnership™, making the LLC a disregarded tax entity that does not require its own tax return.
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