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Charleston Estate Planning & Asset Protection Blog

Friday, May 18, 2018

Five Things You Didn't Know About Family LLCs

Determining the best way to protect your family’s assets so that they can be passed down to the next generation can be difficult. It can also be difficult to decide how to form a family business that will allow the business to grow and flourish while protecting the interests of family members in the business. A South Carolina Family LLC may meet all your goals for asset protection, estate planning, and business operations.

What is a South Carolina Family LLC?

A Family LLC is a type of limited liability company that can be formed by members of a family. However, there is no legal requirement that the members of the LLC be related by blood or marriage. In most cases, the Family LLC is formed and operated like any other LLC, but it does offer families some very important benefits that can make forming a Family LLC very appealing.

Below are five things about a Family LLC that you may find very interesting and helpful.

1. A South Carolina Family LLC does not need to be a business.

A Family LLC works well for many types of businesses; however, having a business is not a requirement for forming a Family LLC in South Carolina. In addition to forming the LLC for a family owned and operated business, you can also use a Family LLC to own and manage brokerage accounts, rental properties, stocks, mutual funds, and other investment assets.

2. The Family LLC protects assets from creditors of the members.

When the LLC owns assets, the creditors of each member cannot seize or levy against the LLC’s property. A member cannot be forced to turn over his or her interest in a Family LLC nor can the creditor place a lien on the LLC. The only remedy for the creditor would be to attempt to collect the debt from any profits or income distributions the member receives from the LLC.

3. Operating Agreements in Family LLCs are very flexible.

The Operating Agreement for a Family LLC can be tailored to meet the needs and desires of the family members forming the LLC. The agreement specifies the typical issues that should be addressed such as management and financial matters. However, the agreement can also be used to further protect family assets and the interest in those assets by limiting who can be a member. For instance, you could use the agreement to prevent relatives who are not blood relatives from being a member. Therefore, LLC rights could be passed to other family members, but not their spouses.

4. A Family LLC can be a useful estate planning tool.

A Family LLC may be used to avoid gift taxes and estate taxes. However, members must be very careful to ensure that the restrictions placed on the LLC to protect the assets and the members do not cause gifts to a donee to be disqualified from the annual exclusion from gift taxes. The Operating Agreement can be very useful in ensuring that transfers or gifts to a donee are handled correctly.

5. Most members do not have a significant role in managing the Family LLC.

In most Family LLCs, the founding member is usually the managing member. By limiting the management roles of other members, the LLC allows members to hold assets at a discount. This feature of a South Carolina Family LLC can be very important for families who own significant property and assets. Schedule a consult with one of our South Carolina Family LLC lawyers today to make an informed decision on your family’s future.

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Wiles Law Firm, LLC helps clients with their estate planning needs in Charleston, South Carolina and the surrounding areas such as West Ashley, Summerville, North Charleston, Mount Pleasant, and John's Island.

Information on this website is not legal advice. Further, viewing of the enclosed information does not create an attorney-client relationship with Wiles Law Firm, LLC. Matters will be handled by attorneys who primarily practice out of our office in Charleston County located at 852 Lowcountry Blvd., Ste. 101, Mt. Pleasant, SC 29464. M. Emerson Wiles, III is the attorney responsible for this advertisement.

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