A Pennsylvania limited liability company “LLC” properly formed pursuant to Pennsylvania law provides its owners, known as “members” protection from personal liability and, therefore, is referred to as a limited liability entity.
Similar to an “S” corporation an LLC for both federal and state tax purposes is a “pass-through entity” such that its members avoid the “double taxation” of income associated with Subchapter “C” corporations. Unlike an “S” corporation federal “check in the box’ rules allow an LLC to elect for taxation purposes to be treated as either an “S” corporation (must also elect “S” status) or if such election is not made treated by default as a partnership for tax purposes.
Whether taxed as a partnership or “S” corporation an LLC member enjoys “pass-through” entity status and avoids the “double taxation” pitfall that characterizes the “C” corporation. A LLC provides a flexible entity structure and is not subject to many ownership restrictions imposed upon “S” corporations.
- Where an LLC has only a single member, the entity is disregarded for tax purposes.
- Despite being taxed like a partnership, the LLC provides its members with the same limited-liability protections associated with business corporations – there is no requirement that a member must be responsible for potential liability of the company.
