For Your Better Understanding Of Member Classes In An LLC
The Following Four Paragraphs Are A Copy And Paste From https://smallbusiness.chron.com/dual-llc-66532.html
LLC Business Structure
The LLC business type fits in between a partnership and a corporation. The owners of a LLC get the same liability protection as with a corporation. However, a LLC is much less costly and complicated than a corporation to set up and maintain. A small business LLC will pass through earnings and deductions to the owners exactly the same as with a partnership structure. The company does not pay income taxes. The owners, called members of a LLC, then report their proportional share of the LLC financial results on their individual tax returns.
Two Classes of Members
The Internal Revenue Service and state regulations have allowed LLCs to be formed with two classes of members. General members are the owners who are actively involved in managing and running the business. Limited members are owners whose activity is limited to being investors in the business. A limited member has no say over how the business is managed. A dual class LLC allows the general members to contribute with "sweat equity" if they do not have the financial asset to fund the business. The limited members get the benefits of pass through income and deductions to use on their taxes.
Members of a regular LLC and partners in a partnership must pay self-employment tax on the net income that passes through from the business. Self-employment tax equates to the employee and employer paid Social Security and Medicare taxes paid for and by employees of a business. With a dual class LLC, only the general members pay self-employment tax. Limited members are viewed as non-participating investors and do not have to pay this tax.
LLC Operating Agreement
The operating agreement document of a new LLC spells out which members will be general and who will be classified as the limited members. The agreement will also detail the duties and investment amounts of the members in the different classes. Also included in the operating agreement will be how income and deductions will be split between the two classes of members. To avoid adverse tax consequences, care must be taken when defining the roles of the two types of members.
In Our Effort To Be Fair We Would Also Like For You To Read The Following
We have a paragraph that we would like for everybody to be aware of.
We feel that it’s fair to all that might have anything to do with the projects we purpose.
The following paragraph is our equal opportunity and non-discrimination policy all rolled into one.
This is not intended to piss anyone off.
"In our effort to be fair to all interested parties, we want you all to know that we respectfully don't care where you come from, who you are, who your mama is, what your sex is, your sexual preferences are, what your political preferences are, or what God or Gods you pray to, as long as you are legitimate and sincere regarding your interests in these projects. We want all interested parties to know, that we don't discriminate against any people of this world, and we expect all parties to be respectful of this and to conduct themselves in a like manner."
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