Advantages and Disadvantages of Colorado LLCs
The below guide outlines the advantages and disadvantages of Colorado LLCs.
Advantages of LLCs1. Most popular and flexible business entity.
2. Multi-member LLCs taxable as partnerships unless elect to be taxed as corporation.
3. Single-member LLC disregarded for income tax purposes unless elect to be taxed as corporation. Not disregarded for employment tax purposes and for purposes of certain excise taxes.
4. Multi-member LLCs taxed as partnerships:
* may have special allocations of income, carried interests, and other special economic provisions;
* may issue profits interests for services without tax upon receipt by the service provider;
* ease of putting property in and taking it out.
Disadvantages of LLCs1. An S corporation may permit more certain employment tax planning.
2. If an LLC will have foreign investors, check to see how LLC income will be treated in their hands. Currently, for example, the United Kingdom does not treat LLCs as transparent. That means that a UK investor in a US LLC that is taxed as a partnership is taxed (by the US) on the UK investor*s allocable share of the LLC*s net income and (by the UK) on distributions received from the US, which the UK treats as a corporate dividend.