One LLC can own another LLC

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The Limited Liability Company (LLC) is a legal form that has no direct equivalent in German-speaking countries and can best be compared with the mixed legal form GmbH & Co KG that can be found in Germany and Austria.

It occupies an intermediate position between the General Partnership (association of persons) or Sole Proprietorship (sole proprietorship) and the corporation, to the extent that it is legally treated as a legal person, which guarantees liability protection for all owners.

In terms of taxation, on the other hand, an LLC behaves like a partnership, in which the profits are passed on to the members (pass-through taxation), who then pay tax on their income tax return, which is often lower for smaller companies and one-man companies Tax burden leads. The main reason for this is the fact that a corporation incurs taxes at the level of the company and at the level of the shareholders and thus double taxation takes place, which does not mean that twice as much has to be paid, but only that there are two tax levels.

From a tax law perspective, the LLC represents a kind of partnership that provides all owners with liability protection and at this point behaves like a corporation.

LLC is intended for small business owners

The Limited Liability Company (LLC) was primarily designed for smaller companies and start-ups, for whom a corporation would be too oversized in that the legal provisions must also be suitable for large corporations, which naturally becomes a strong one in companies with one or a few men Overregulation, which is rather a hindrance in this context.

As a rule, it is therefore assumed in most states that the owners of the LLC, who are referred to as members, also run the company themselves, which means that the LLC is considered member-managed, since the managing directors of an LLC are not directors, but managers are designated. In the case of larger LLCs, only certain members can be appointed as managers or outsiders who are not involved in the LLC, which is then referred to as manager-managed. How an LLC is ultimately structured is decided by the respective LLC Operating Agreement, which in this case corresponds to the articles of association and which defines the complete legal framework that is to be applied in the internal relationship.

This includes things like the exact rights and obligations of the members and managers, how the profits are distributed or how meetings are held and the voting rights are designed. If no statements are made about certain things in the Operating Agreement, the statutory provisions of the respective state in which the LLC was registered apply.

An LLC can also be registered without initial capital

There is no minimum capital requirement to set up an LLC. It is enough for the formation of $ 1 per owner. In contrast to a corporation, an LLC does not issue shares, but membership certificates, and therefore cannot go public.

It should be noted that the tax differences only apply if the members of the LLC are also resident and taxable in the USA. For non-US resident entrepreneurs, the taxation is completely different, so that the differences between LLC and corporation for foreigners - in the sense of non-American residents - do not apply. The differences between the two legal forms are often even completely leveled out depending on the specific case, so that completely different decision criteria can be decisive for or against a legal form.