Limited Liability Companies
Arizona allows the establishment of an entity called a “Limited Liability Company”. The most popular type of business entity in Arizona is the LLC. An LLC can hold title to Arizona real estate and can operate almost any type of interest. If the business is a professional business such as a doctor’s office or attorney’s office, a “professional limited liability company” is established. If you form an LLC you have a wider selection on how you want to be taxed. You can be taxed as a sole proprietorship, under subchapter K of the code, under subchapter C of the code or under subchapter S of the code. Whether you are a “C Corporation” or an “S Corporation”, that designation has nothing to do with the business entity that you are establishing. That designation has to do with how you want your company to be taxed. Most LLC’s elect taxation under subchapter S if there is only a few owners.
A person who establishes an LLC probably has more creditor protection than if he/she establishes a corporation. Although under a corporation, a shareholder is not personally liable for corporate debts; a creditor can “foreclose” on your stock and take over the corporation. Under the LLC, you have personal liability protection but your LLC is not subject to takeover by a creditor. The LLC will only be required to distribute to the creditor any money or property that is distributed out of the LLC to you. In effect, you do not lose your business and you can simply not distribute money or property from the LLC. Of course you can still get a “paycheck”. For a consultation, please contact us.