Limited liability company

A limited liability company (denoted by L.L.C. or LLC) is a legal form of business company offering limited liability to its owners. It is similar to a corporation, and is often a more flexible form of ownership, especially suitable for smaller companies with a limited number of owners. Unlike a regular corporation, a limited liability company with one member may be treated as a disregarded entity, so the member is often singled-out as a person performing the actions of the LLC.

Choosing to operate by member management creates a flat member or partnership structure. Choosing manager management creates a two-tiered management structure potentially convertible into a corporation, with the attendant tax consequences. LLCs are organized with a document called the “articles of organization”, or “the rules of organization” specified publicly by the state; additionally, it is common to have an “operating agreement” privately specified by the members. The operating agreement is a contract among the members of an LLC governing the membership, management, operation and distribution of income of the company.

Managing members are the individuals who are responsible for the maintenance, administration and management of the affairs of a LLC. Unless the articles of organization or operating agreement provide otherwise, management of an LLC is vested in the members in proportion to their ownership interest in the company.

LLCs can lose their tax advantage without the partnership structure. The possible label “disregarded entity” for income tax purposes singles out the one-member owner of an LLC as actually earning income and deductions directly. It is the owner, then, who reports as a business proprietor, rather than as an LLC operating an active trade or business. An LLC owned by a corporation - in other words, an LLC with a single corporate member - would be treated as an incorporated branch and have its income and deductions reported on the corporate tax return, creating double taxation.

The limited liability company has a number of advantages, such as: no requirement of an annual general meeting for shareholders, no loss of power to a board of directors, much less administrative paperwork and recordkeeping, pass-through taxation (i.e., no double taxation). Limited liability means that the owners of the LLC, called “members”, are protected from liability for acts and debts of the LLC. Using default tax classification, profits are taxed personally at the member level, not at the LLC level. LLCs in some states can be set up with just one natural person involved. Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits and losses (like a partnership), without transferring the title to the membership interest. LLCs in some states are treated as entities separate from their Members, whereas in other jurisdictions case law has developed deciding LLCs are not considered to have separate juridical standing from their members.

Notes:

1. limited liability company – товарищество, общество, компания с ограниченной ответственностью

2. management structure – структура управления

3. operating agreement – договор на эксплуатацию

4. tax advantage – выгода, обеспечиваемая существующей системой налогообложения

5. corporate member – корпоративный акционер

6. tax return – налоговая декларация

7. double taxation – двойное обложение

8. i.e. (id est) – то есть

9. annual general meeting (AGM) – ежегодное общее собрание

10. recordkeeping – учет, ведение учета [бухгалтерских книг]

11. assignee – уполномоченный

I. Прочитайте текст (без словаря).

II. Перепишите и письменно переведите на русский язык следующие предложения. Помните, что объектный и субъектный инфинитивные обороты соответствуют придаточным предложениям.

1. The director considers the funds to be insufficient.

2. In the short run, the greatest gain for many developing countries is likely to come from improvements in the testing, certification, and accreditation institutions to underpin greater enforcement capacity.

3. Shareholders are assumed to know what income they would have.

4. The managers know the economic benefits of distributions of profits to influence members’ decision to invest.

5. Major imbalances in the world trading environment persisted during 2004 and will likely continue to play a large role in 2005–06.

III. Перепишите и письменно переведите на русский язык следующие предложения. Обратите внимание на перевод зависимого и независимого (самостоятельного) причастных оборотов.

1. The two principle models of companies were considered to be the joint stock company and the public limited company, the limited liability company offering limited liability to its owners.

2. Choosing manager management creates a flexible management structure potentially convertible into a corporation, and avoids double taxation.

3. Managing members of the limited liability company govern the membership, management, operation and distribution of income of the company, with the government taking a passive role.

4. A new board of directors been elected, the entity’s income decreased greatly.

5. The limited liability company has a number of advantages, with much less administrative paperwork and pass-through taxation being the most attractive advantages.

IV. Перепишите и письменно переведите на русский язык следующие сложные предложения. Обратите внимание на перевод условных предложений.

1. They would have avoided double taxation, if they had organized a limited liability company last year.

2. If the debts and obligations of the firm increase, we will run into problems next year.

3. Many disputes can be avoided if all members of the grouping adhere strictly to an identical tariff classification.

4. If a franchise tax was levied on company after the 1^st of January, we should form a new corporation and merge into it.

5. Because national authorities often fear a loss of sovereignty if they allow foreign operators in the market, a regional legal framework and effective enforcement mechanisms are necessary for successful implementation.

V. Прочитайте, перепишите и письменно переведите текст.

VI. Ответьте на вопросы по тексту:

1. What is a limited liability company?

2. What is the structure of the Limited Liability Company?

3. Why can the Limited Liability Company lose its tax advantage?

4. What are the advantages of the limited liability company?

5. What does limited liability mean?

Вариант 5

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