Corporate Taxation

Introduction

In my opinion Harold Johnson and all other co ventures should go for limited liability company structure when considering his co venture as the procedures to form a Limited Liability Company, are simpler than those of a corporation (limited company or corporation).

Tax benefits

A corporation is taxed on the income tax. Later, if you distribute dividends to shareholders, they need to pay for them in their individual tax returns. With the LLC, the same benefit is declared only once, as personal income. This can be advantageous in cases where the owner is in a low tax bracket, i.e. the percentage of tax you pay on your income level is not too high.

Protection from creditors

In case of a lawsuit or unpaid debts, it is not uncommon for courts to order seizure of Shares which the debtor may have in companies. In this way the creditor's rights are that the debtor had in such companies. With a Limited Liability Company the case is different. In these businesses are not clearly separated the capital of the company's management, as for example in a corporation. This means to gain control over the shares in the LLC, usually also imply certain responsibilities regarding the management and daily operations of the company. This could cause problems if any number of partners, as they suddenly find themselves with a complete stranger to the organization participating in its management (Keatinge ,384).

For this reason in the multi-member LLC, the courts usually do not allow the seizure of the debtor's shares in the company, but merely to allow what is called charging order. This entitles the creditor to collect all the company to pay dividends to the debtor until the debt is cleared. But a charging order creditor will not have direct control over society. This means that the other partners may decide not to pay dividends and thus prevent the collection of the debt. For this reason, Limited Liability Company offers greater protection to creditors than a normal corporation.

The LLC is not conceived initially as offshore company. But its peculiar characteristics and especially their treatment by the IRS (U.S. tax agency) can use it like an IBC and in some specific cases, even greater benefits.

For citizens not resident in the United States may be of interest form an LLC in USA. As we have seen, society may choose to be ignored for tax, spending the tax ...