Legal Question in Business Law in Ohio

Dear Shmuel: Thank you for your inquiry. Yes, the arrangement you describe is permissible and possible. First, a few words about the LLC:

A limited liability company, like a corporation, is a legal entity separate from its members. It may be formed by two or more individuals or members. The members may themselves be a legal entity such as a corporation, association or trust. Limited liability companies offer the major tax advantage that a partnership does and a corporation does not. That is, taxation on profits is only at the individual level, and not also at the company level. Consequently, profits in a limited liability company avoid being taxed twice the way they are in a corporation. While this is also true for the ?S? corporation form of business that allows owners to have the same tax advantage, a limited liability company has far fewer restrictions imposed on it than the ?S? corp.

The limited liability company is also very favorable to members with regard to liability. In a corporation, owners are only liable up to (the limits

of) their investment. In a partnership, partners have unlimited liability for contracts entered into, and for the wrongful acts committed by other partners. The limited liability company (LLC) members, however have only the liability that a corporate owner does, up to the amount of their investment.

While it is true that in a limited partnership (LLP) form of business, a limited partner has liability only up to the amount he or she invested, and that a limited partner may be a passive member, and not necessarily take an active part in management, in contrast, a member of a limited liability company (LLC) may manage as actively as desired, while still maintaining the limited liability protection under the law.

Selection of the form of business entity, and the contracts for it, should be made with the assistance and guidance of experienced counsel, in order to maximize the benefits available under the law, minimizing risk.

You should retain the services of an experienced Attorney to guide and assist you in the proper formation and governance, etc. for mutual protection and avoidance of any misunderstandings, particularly amongst family members.

Good luck! Mahzeltov!

Sincerely, J. Norman Stark, Cleveland