What Is an LLC?
A Limited Liability Company, commonly known as an LLC, is a type of business structure recognized in all 50 states that protects its owners (called “members”) from personal responsibility for its debts or liabilities. Each state has its own rules regarding LLCs. Therefore, it is extremely important to form an LLC with attorney assistance. An Orange County estate planning attorney has the proper skills to help you achieve your purposes in relation to the business activities and management. An operating agreement will be the proper tool to establish all your rights of ownership and decision-making hierarchy, among others.
Benefits of Using an LLC for Estate Planning
There are numerous benefits of using an LLC for estate planning purposes. An LLC’s members are protected from personal liability and the gifting process to family members are simplistic. You can protect your assets in the event of incapacity since your LLC will have an operating agreement in place, which will establish the operation of your business during your incapacity, among others.
What Can I Transfer Into an LLC?
There are numerous assets that you can transfer into an LLC, including, but not limited to:
- Personal possessions;
- Title insurance;
- Mortgages, among others.
What is a Family LLC?
A family LLC is a type of LLC that differs from a standard LLC, mostly in relation to its owners. Only people related by blood or marriage can be members of a family LLC. While you hold the management control of your family LLC, your heirs can become shareholders and can then benefit from the assets held by the established LLC.
How a Family LLC Works
As discussed above, a family LLC is formed exclusively by family members. After its formation, you will begin the process of transferring assets into the LLC. You will also formalize an operating agreement with the LLC members which will establish, among other things, how the business will be operated and who has the management control.
Benefits of Family LLCs
Like a corporation, an LLC’s members are protected from personal liability, meaning, their assets are shielded from debts and lawsuits, among others. Even though each state has its own regulations governing an LLC running, formation, and taxation, it is prudent, in order to be fully covered by these benefits, to make sure that your business has a valid operating agreement in place. An operating agreement is an instrument used by LLCs to outline the business’ financial and functional decisions. Once this instrument is completed and signed by all of an LLC’s members, the operating agreement will become legally-binding.
While you retain management control of a family LLC, you can have your children and grandchildren as members of the same family LLC but not having management or voting rights. Here, you can see the tax benefits coming into play. A non-managing member can receive units from a family LLC with a tax discount of up to 40% of their market value.
How Evolution Tax and Legal Can Help You Form an LLC
If you are wondering about adding an LLC into your estate planning portfolio, you can always come in for a consultation to discuss your situation. Our team can help guide you through choosing the best plan for your needs. Please get in touch with us if you’d like to understand the next steps beforehand.