Key Features of an LLC: Identifying Non-Features

Question:

Which of the following is not a feature of the limited liability company (LLC)?

– Individuals or corporations can be members.

– Limited liability.

– Set up under state statutes.

– Limited life.

– Double taxation.

Answer Description:

A Limited Liability Company (LLC) is a versatile business structure offering several benefits and features. To identify which option is not a feature of an LLC, let’s examine each statement:

Individuals or corporations can be members: This is true. LLCs can have individuals, corporations, other LLCs, and foreign entities as members.

Limited liability: This is true. One of the key features of an LLC is that it provides limited liability protection to its owners (members), shielding personal assets from business debts and claims.

Set up under state statutes: This is true. LLCs are formed according to state laws and regulations, and each state has its own rules governing their creation and operation.

Limited life: This is true but with a caveat. By default, many LLCs are designed to have a limited life span, often ending up on the departure or death of a member. However, most states allow LLCs to be set up with perpetual existence if specified in the operating agreement.

Double taxation: This is false. One of the main advantages of an LLC is that it generally avoids double taxation. Instead, profits and losses are passed through to the member’s tax returns, similar to a partnership.