Limited Liability Company
Limited Liability Company ( LLC) is an American corporation in its basic form. In the LLC no party is personally liable, as in German-speaking countries in the GmbH. The shareholders may opt to a qualification as a partnership. Benefit the shareholders of this possibility, the LLC, however, is best compared with a limited partnership without complementary.
BMF letter to the U.S. legal form LLC
By letter of 19 March 2004, the Federal Ministry of Finance ( BMF) has shown the general principles for the classification of an American LLC ( Limited Liability Company ).
The LLC is the combination of limitation of liability of the shareholders with the option of a treatment as a partnership for many German investors an attractive legal form. Due to various social contractual design options, the LLC is mainly in the area of small and medium-sized enterprises use.
The tax treatment of the LLC under U.S. tax law is based on the model option ( check- the- box method ): The shareholders may opt to a qualification as a partnership. Failure to exercise this right to vote, subject to the LLC as a separate taxable entity to corporation tax. Given the double burden of profits (taxation at the level of LLC taxation of distributed profits net of the shareholder at any time) and the possibility of offsetting losses incurred by the LLC with positive income the partner is a qualification is chosen as a partnership in the rule.
For the tax treatment of the LLC in Germany is decisive whether the Company to qualify as a separate taxable entity (as defined in the Corporation Tax Act ) or is to be regarded as a partnership. Through an overall view is supported by the so-called " two-stage right type of comparison is" checked whether the found form of organization in all its configurations but corresponds more closely to a picture of a partnership or a corporation.
If the LLC qualifies as a corporation under German law, the Company itself is taxed; the shareholders are subject only to the dividends to taxation in Germany. If the LLC qualifies under German law as a partnership, the determined at the level of LLC income is directly attributable to the shareholders and taxed; the making of dividends is tax irrelevant in that regard.
Special features and design options can be found in the LLC when the German qualification on the one hand and the U.S. on the other classification not match.