How does the new LLC determine the total number of issuable shares?

What are the differences between shares in an S corporation and membership interests in an LLC in Florida?

• What are the tax impplications of each? Can "founders Shares" or the like "founder's Membership Interests" be issued to "Founders" who are contributing "sweat equity" and/or non-defined intellectual property rather that cash, property or other asstets. if yes, what are the tax implications of such an issuance of "founder's membership interests". I am pretty familiar with S corps but not with LLC's. Does it matter if the memership interests are called shares in the LLC operationg agreement? What is the typical goveneance structure or an LLC? Does it have a board of directors? Does it typically and /or can it have a typical hierarchy of officers like the corporation Chairman, President, VP, Treasurer , SEcretary. What are the typical titles? Does percentage "member interest ownership", determine who has control? If not, what does determine who is in control? What is the best free online reference for understanding LLC's legal, tax and practical implications vs a corporation???

• Answer:

  That's a lot of questions, lol. Q. What are the tax impplications of each? A. Both an S corp and an LLC with more than one member can be treated as partnerships for federal income tax purposes. However, each state can have different taxes for S corps and LLCs. So check with your tax accountant as to what LLC level tax Florida has as opposed to what S corp state tax is. Q. Can "founders Shares" or the like "founder's Membership Interests" be issued to "Founders" who are contributing "sweat equity" and/or non-defined intellectual property rather that cash, property or other assets? A. Yes. The issue you'll have is what basis those membership interests are assigned and how it will be recorded in the capital account of the member. Consult the accountant who will be keeping the books of the LLC. Q. Does it matter if the memership interests are called shares in the LLC operationg agreement? A. No, but I personally find the practice illogical -- its like naming your dog "cat" Q. What is the typical governance structure or an LLC? Does it have a board of directors? A. Typically the statute will specify that an LLC may have managers and those may serve as a combination of the board/executive officer. However, the beauty of LLCs are their flexibility -- you may have a board of managers and have your operating agreement specify that while the managers are the ultimate managers that day to day operations will be run by officers to whom the managers delegate authority. In that way, you can effectively recreate a standard corporate structure. Q. Does it typically and /or can it have a typical hierarchy of officers like the corporation Chairman, President, VP, Treasurer , Secretary. What are the typical titles? A. There really is no "typical" LLC but yes you may have in your operating agreement provisions for the creation and delegation of authority to a set of officers similar to those in a corporation. Q. Does percentage "member interest ownership", determine who has control? If not, what does determine who is in control? A. Yes and no. In the absence of other provisions in the operating agreement, membership interest ownership is like share ownership -- the person with the majority can control the election of managers and larger organic votes that require member consent. However, unlike an S corp but like a C corp which can have different classes of stock, an LLC can have different classes of membership interests. You could have, for instance, a class of membership interests which gets economic rights but no voting rights so someone who might have the right to a majority of the economics would not have the right to control the company. In order to find out what the deal is or determine what the deal is, you need to review/set it out in the LLC agreement. That's why in the hands of good businessmen and good lawyers an LLC provides much more flexibility than an S corporation. That's why all hedge funds and buyout funds are limited partnerships and their ownership vehicle are LLCs, not S corp's -- because you get the great tax treatment but you are not limited to the simplistic structures of S corps. Q. What is the best free online reference for understanding LLC's legal, tax and practical implications vs a corporation??? A. Do me a favor and search using www.yahoo.com/search! I would check Wikipedia but I'd also just generally search and read up on LLCs. Why don't you go to a local law library and pick up a copy of Florida corporations code and read its limited liability company act (its a separate set of statutes). That'll show you the baseline corporate rules governing LLCs