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Limited Liability Company

Discussion of a relatively new type of business entity. LLC members treated like partners in Indiana WC.

All states have created a new type of business entity called a Limited Liability Company (LLC). A limited liability company is a business entity created by state statute that offers investors the limited liability and structure of a corporation and the tax and organizational benefits of a partnership. Although an LLC maintains features of both a corporation and a partnership, it is neither; despite it's similarity to a Subchapter corporation and limited partnership. We are familiar with other types of business entities (corporation, Subchapter corporation, partnership, sole proprietor).

Indiana WC law treats members, managers, or officers of an LLC as partners and are not covered for workers compensation. However, a member or manager may elect to be included as an employee by filing the "Notice for Worker's Compensation and Occupational Diseases Coverage (79)" State Form 36097 (R2/1-88) which is commonly called the sole proprietor or partner election form. The form is filed with the WC Board of Indiana. IC 22-3-6-1(b)(9) states "A member or manager in a limited liability company may elect to include the member or manager as an employee...if the member or manager is actually engaged in the limited liability company business." Since the law allows a member or manager to elect coverage (and fill out and sign the form), an individual person must make the election. So, where one LLC might own another LLC, the carrier will want to know if the owning LLC members are active and desire to be covered.

When the management of an LLC is vested in the members, its management structure is similar to a general partnership; each member has the authority to conduct LLC business. The managers are elected by the members, and can be compared to the directors of a corporation whom the shareholders (members) elect annually to manage the corporation's business and affairs.

The Indiana Code is available on the State of Indiana website at this address: http://www.state.in.us/legislative/ic/code/.


Limited Liability Partnership (LLP)
LLP is not mentioned specifically in the WC statute. The Indiana Secretary of State’s website contains this definition: http://www.in.gov/sos/business/corps/guide.html

“Limited Liability Partnership: A General Partnership which elects to operate as an LLP. To operate as an LLP, a Registration must be filed with the Secretary of State. Unlike a General Partnership, the partners in an LLP enjoy protection from many of the partnership's debts and liabilities. TAX: The income of an LLP is taxed in the same manner as a General Partnership.”

Also, here’s a definition from Wikipedia, the free online encyclopedia

“A limited liability partnership (LLP) is a form of business organization combining elements of partnerships and corporations. In an LLP, all partners have a form of limited liability, similar to that of the shareholders of a corporation. However, the partners have the right to manage the business directly, and (in many areas) a different level of tax liability than in a corporation.

Limited liability partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result the LLP is more suited for businesses where all investors wish to take an active role in management. However, some US states have combined the two forms to create limited liability limited partnerships.

Although found in many business fields, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses.”

It appears that since an LLP is a type of partnership, the partnership section of the WC statute would apply like for any other partnership.


More Information
Article from Inside Indiana Business, June 1, 2007
By: Richard Thrapp and Michael Buker - Deputy Managing Partner and Tax Advisor, Ice Miller LLP
 
Blog posting from Intuit, January 16, 2012, on "What is an LLC"
 
 

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The material in this document has been prepared and shared for informational purposes only and should not be relied upon as legal advice on any particular situation.