Increasing numbers of businesses are choosing to operate as limited liability companies taxed as S corporations. This form of organization, which involves an entity organized as an LLC under state law that makes an election to be treated as an S corporation for tax purposes, takes advantage of the best of both types of entity. An LLC possesses a flexible management structure, allowing it to be operated like a partnership and avoiding required corporate formalities. An S corporation, on the other hand, enjoys favorable employment tax treatment. An S corporation’s shareholders are not subject to employment taxes on corporate income except to the extent it is distributed to them as salaries or other compensation. Income distributed as dividends or accumulated for capital needs is not subject to employment taxes. In comparison, members of an LLC taxed as a partnership must pay self-employment tax on their shares of the LLC’s income in the year it is earned, whether or not any of it is distributed. The Internal Revenue Code requires an entity taxed as an S corporation to meet certain requirements. If they are not met, the entity cannot make an S corporation election, and if they cease to be met, the entity’s S corporation election is terminated. Standard LLC operating agreements lack the provisions necessary to address these requirements. Our Form 3.4, Operating Agreement for LLC Taxed as an S Corporation is specifically designed for LLCs that elect to be taxed as S corporations.
We updated the CD-ROM containing all 35 of our forms on January 1, 2010. The update, which is available to customers who own a prior version of the CD-ROM, takes the form of a replacement CD-ROM containing current versions of our forms in both Word and RTF formats. For those customers who have created personalized forms based on our forms, the CD-ROM contains blacklined versions of our forms indicating the nature and location of the revisions that have been made. If you have an existing copy of our CD-ROM, you can order the update by telephone, mail, or fax as is explained on the How to Order page. The price of the update is $45. Unfortunaltely, the CD-ROM update is not available for purchase on our website. If you haven't purchased your copy of our CD-ROM yet, you can order one on our website as well as by the other means explained on the How to Order page. Purchasers of the CD-ROM receive the latest copy of all of our forms and also qualify to purchase future updates.
The steps necessary to form an LLC are outlined on our LLC Formation page. This page also briefly describes our various operating agreement forms and the situations for which they are designed.
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