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Dear Kathy,:
A limited liability company with two or more members is taxed as a
partnership by default (and a single-member LLC is a disregarded entity for
tax purposes and treated like a sole proprietorship). Your LLC would not be
taxed differently unless a special election was made with (and accepted by)
the Internal Revenue Service.
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LLCs have the option of making a special election to be taxed as either a
corporation ("C" corporation) or an S corp. The election for tax
classification as a corporation is made on IRS Form 8832. The election to be
taxed as an S corp is made on IRS Form 2553. To verify the tax
classification of your LLC, you can contact the IRS toll-free at
800-829-4933.
How a member can resign from an LLC--or whether a member can even resign
from an LLC at all--depends in part on state laws governing limited
liability companies and the LLC's governing documents. Laws vary from state
to state but usually allow the resignation of a member only to the extent
that it is so provided in the LLC's articles of organization or operating
agreement. An operating agreement may also have provisions outlining certain
"triggering" events (e.g. bankruptcy, disability, divorce)--events that
could trigger the removal of a member from the LLC. Barring that, there may
be special circumstances in which the removal of a member may require a
court order; you should consult an attorney for advice in this area.
In any case, articles of amendment may be filed with the secretary of
state amending the LLC's articles of organization to reflect current
membership. Also, many states require LLCs to file an annual report listing
the current members as of the time of filing; and some states may offer a
prescribed form on which to file a statement of disassociation of a member.
Contact the secretary of state's office in your LLC's state of organization
for information on filing options and reporting requirements.
Chrissie
About the PowerHomeBiz.com Guide:
 Chrissie
Mould Chrissie Mould has over a decade of experience in business
administration and startup business consulting. She has helped launch
companies in multiple industries and has managed corporate administration
and governance for public and private companies. She is an incorporation
specialist with MyNewVenture.com LLC. The company provides low-cost
incorporation services to entrepreneurs and small businesses. Visit
www.MyNewVenture.com to form
a corporation or LLC.
EDITOR'S NOTE:
For more information about LLC please refer to IRS Publication P3402 "Tax
Issues for Limited Liability Companies"
http://www.irs.gov/pub/irs-pdf/p3402.pdf Among the features of LLC
are "management flexibility and the benefits of pass-through taxation."
The opinions expressed in this column are those of the
author, not of PowerHomeBiz.com. Users should not treat the Guide's response as
legal, accounting, or professional advice as all answers are intended to be
general in nature. Such advice can only be properly given by qualified
professionals who are fully aware of a user's specific geographical areas or
circumstances, such as an attorney or accountant.
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