Limited liability companies: best of both worlds

Limited liability companies (LLC) provide a new business organization alternative for investors. LLCs blend the features of corporations and partnerships while attempting to minimize the disadvantages of each. LLCs are well suited for start-up businesses. Other small closely held businesses can often benefit from the ability to retain both a voice in management and limited liability for investors. LLCs pose a popular alternative for venture capital firms, oil and gas ventures, and ESOPs. Joint venture investors can achieve limited liability for all investors, without having to designate a general partner in the traditional limited partner arrangement. Existing corporations may not find it as advantageous to convert to an LLC. One of the primary restrictions on the conversion of a corporation to an LLC is the double taxation consequences upon the liquidation of the corporation and the Section 311 gain on appreciated property. Even S corporations may be subject to the gain conversion dilemma.