In the last presidential election, one of the rallying points for voters was President Trump’s desire to “drain the swamp.” The “swamp” is a metaphor for the bureaucracy of the federal government and the special interests that control our laws. President Trump never said how this goal would be accomplished, but one thing for sure is he has failed to use the one true vehicle to accomplish this goal — the United States Tax Code.
Due to the popular show Game of Thrones, the term “bend the knee” has made its way into public conversations. In the HBO show, the term is basically a submission and a pledge of loyalty to a king or queen. In the real world, the term “bend the knee” has also taken on new significance over the last year. Even if you are not a football fan you probably heard about professional football players kneeling during the National Anthem, which is played before a game is started.
The term used for an owner of an LLC is “member” and an LLC can have a single member or many members. The difference between the two is fairly obvious, but can be worth addressing. Generally a single member LLC will be managed by that single member, though it is entirely possible that the single member could chose to have a manager run the LLC instead. The single owner LLC generally operates much like a sole proprietorship with the owner exerting full control over the business.
Unlike most of the common business entities that exist today, the LLC has a fairly brief history in the United States. Entities such as partnerships, sole proprietorships and corporations have existed since the founding of the country. The LLC, however, has only existed in a recognizable form for roughly thirty-five years. What, then, led to the creation of this new entity? The single most important reason for the creation of the LLC was what has come to be known as “the tax-shield conundrum.”
The process of creating a tax-exempt organization is generally viewed as a difficult process and while the individual steps can be daunting and time consuming, the differences between beginning a corporation and beginning a tax-exempt corporation are largely similar. This article will discuss the chief differences that should be noted when starting a tax-exempt corporation as well as briefly address liability issues with unincorporated organizations and LLCs. The focus of this article is on Nebraska and corporations being formed under its laws, however, because tax-exemption is largely a creature of federal law much of the article is applicable to corporations formed in other states as well so long as care is given to address differences in state corporate law.