When the North Carolina Limited Liability Act became effective on October 1, 1993, North Carolina joined many states in recognizing this relatively new entity. Initially, limited liability companies (LLCs) enjoyed limited use due to uncertainties regarding how such an entity would be treated for federal income tax purposes. The Internal Revenue Service (IRS) clarified its position on the treatment of the LLC and, as a result, limited liability companies have become increasingly popular as an alternative to incorporating the small business.
An LLC offers a wide variety of benefits and advantages. A recent change is that an LLC, like a corporation, may now exist perpetually. There is limited personal liability as a member of the entity, even if the member participates in the management of the business. An LLC may have different classes of interests and offer greater flexibility in structuring the membership interests than an S corporation. Notably, a corporation may be a member in an LLC, while a corporation may not be a shareholder in an S corporation. In addition, the LLC can be classified as a partnership for income tax purposes, potentially eliminating the "double taxation" tied to a traditional C corporation.
There are two types of LLCs recognized in North Carolina: member-managed and manager-managed. In a member-managed LLC, each member is also a manager of the LLC by virtue of being a member. A member-managed LLC is analogous to a general partnership, as all members take a management role in the company.
In a managed LLC, there are in essence two tiers of membership. Managers are designated to manage the day to day operations of the business and are not managers simply because they are members. A manager-managed LLC is similar to a limited partnership, as a member can simply be an investor in the business without taking part in the management of the company. A manager-managed LLC is useful because the individuals designated as managers do not have to be members or have any ownership interest in the company. Again, keep in mind that corporations or other entities may be members or managers of an LLC.
An LLC is created by filing Articles of Organization with the North Carolina Secretary of State. An operating agreement executed at the organizational meeting governs the LLC, like the by-laws of a corporation. The operating agreement outlines the responsibilities of the managers, members, the percentages of ownership and the percentages of profits and losses attributable to each member. Changes in the ownership structure are easily documented by revising the operating agreement.
This article is a basic introduction to LLCs. There are many factors beyond the scope of this article to consider when choosing a business entity. You should consult your accountant to make sure that the LLC is the right entity for your business from a revenue/tax standpoint in addition to seeking legal advice.
If you have any questions regarding the information in this article, please call Tracy Debnam at (919) 250-2107, or by e-mail at ttdebnam@smithdebnamlaw.com.
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Child Support North Carolina Child Support Guidelines Child support is calculated based on the North Carolina Child Support Guidelines, which are statewide presumptive guidelines formulated by the Conference of Chief District Judges. Copies may be obtained from the offices of the Clerk of Superior Court. There are three versions of the child support worksheet on which support can be calculated. Worksheet A is used if the child is with the non-custodial parent fewer than 123 overnights per year. If the child is with the non-custodial parent more than 123 overnights per year, Worksheet B is used. Worksheet C is used if one child lives with one parent and the other child lives with the other parent. For purposes of the Guidelines, "income" is defined as actual gross income of the parent if employed to full capacity, or potential income if unemployed or underemployed. Gross income includes income from any source, including but not limited to salaries, commissions, bonuses, dividends, pensions, trust income, social security benefits, workers compensation benefits, unemployment insurance benefits, disability pay, gifts, alimony and support payments received from persons other than the parents of the child for whom support is being calculated. Specifically excluded from gross income are benefits from public assistance programs, including Aid to Families with Dependent Children (AFDC), Supplemental Security Income (SSI), food stamps and general assistance. With self-employed parents, gross income includes gross receipts minus ordinary and necessary expenses of the business. Depreciation expenses and investment tax credits are among the business expenses allowed by the Internal Revenue Service, but not considered appropriate in determining gross income for calculating child support. If a parent is voluntarily unemployed or underemployed, income may be imputed so that parent based upon his or her recent work history, occupational qualifications and prevailing job opportunities and earnings levels in the community. If there is no recent work history, potential income may be imputed based upon a 40-hour workweek at minimum wage. No income will be imputed to a parent who is physically or mentally incapacitated or who is caring for a child who is under the age of three years and for whom the parents owe a joint legal responsibility. Certain adjustment to the parents' monthly gross incomes are allowed if they have pre-existing child support obligations or responsibility for other children. The amount of child support payments made by a parent under a court order or separation agreement (for a child who is not involved in the action) is deducted from that party's gross income. Similarly, a parent with another natural child living in the home may deduct the amount of his/her financial responsibility for that child from his/her gross income. Responsibility for that other child is based on one-half of what the child support obligation would be for the party and the other responsible parent of that child. Once these amounts are deducted from the parents' monthly gross incomes, the basic child support obligation is then determined by the adjusted gross incomes. The Schedule of Basic Child Support Obligation, which is included in the Guidelines, is based primarily on economic research of the patterns of expenditures on children. Once the basic support obligation is determined, certain credits are given for child care, health insurance payments and extraordinary expenses.Health Insurance, Child Care Expenses and Extraordinary ExpensesThe cost of health related insurance for the child is added to the basic support obligation. If the amount attributable to the child cannot be determined, the total cost is divided by the number of people covered and the individual cost is multiplied by the number of children for whom child support is being calculated. Medical and dental costs in excess of $100 per year and unreimbursed by insurance should be divided by the parents in proportion to their respective incomes. Child care costs incurred due to employment or job search and also added to the basic child support obligation.In the discretion of the Court, extraordinary expenses may be added to the basic child support obligation. These expenses may included uninsured medical expenses in excess of $100 for a single illness or condition, expenses for orthodontia, dental treatments, asthma treatments, physical therapy, and uninsured chronic health problem, professional counseling and psychiatric therapy for a diagnosed mental disorder; expenses of attending a special or private elementary or secondary school to meet the particular educational needs of the child and transportation expenses for the child between the parents' homes.Determination of the Presumptive Child Support AmountThe total child support obligation is calculated by adding the child care costs, health insurance costs and extraordinary expenses to the basic child support obligation. The non-custodial parent's obligation is determined by multiplying the total child support obligation by his or her percentage of combined adjusted gross income. The non-custodial parent receives credit for the amount of child care costs, health insurance premiums and extraordinary expenses that they pay out-of-pocket. The resulting amount is the child support obligation owed to the custodial parent.Deviation from the GuidelinesUpon its own motion or upon a motion from either party, the Court may deviate from the Guidelines in cases where application of the Guidelines would be inequitable to one of the parties or to the child. Detailed information on the parents' income and expenses and the reasonable needs of the child are required for a party requesting a deviation from the Guidelines.Child Support and VisitationChild support and visitation are totally separate issues. Some non-custodial parents withhold child support unless they get the visitation they want. Likewise, many custodial parents deny the non-custodial parent visitation unless they pay child support. Parents need to resolve these issues separately and not at the expense of the children, who are the ones who suffer when child support is not paid or visitation is denied.If you have any questions regarding the information in this article, please call Cynthia McAlister at (919) 250-2168 or cmcalister@smithdebnamlaw.com, Jeff Ellinger at (919) 250-2172 or jellinger@smithdebnamlaw.com or Rose Stout at (919) 250-2169 or rstout@smithdebnamlaw.com.
Child support is calculated based on the North Carolina Child Support Guidelines, which are statewide presumptive guidelines formulated by the Conference of Chief District Judges. Copies may be obtained from the offices of the Clerk of Superior Court. There are three versions of the child support worksheet on which support can be calculated. Worksheet A is used if the child is with the non-custodial parent fewer than 123 overnights per year. If the child is with the non-custodial parent more than 123 overnights per year, Worksheet B is used. Worksheet C is used if one child lives with one parent and the other child lives with the other parent.
For purposes of the Guidelines, "income" is defined as actual gross income of the parent if employed to full capacity, or potential income if unemployed or underemployed. Gross income includes income from any source, including but not limited to salaries, commissions, bonuses, dividends, pensions, trust income, social security benefits, workers compensation benefits, unemployment insurance benefits, disability pay, gifts, alimony and support payments received from persons other than the parents of the child for whom support is being calculated. Specifically excluded from gross income are benefits from public assistance programs, including Aid to Families with Dependent Children (AFDC), Supplemental Security Income (SSI), food stamps and general assistance. With self-employed parents, gross income includes gross receipts minus ordinary and necessary expenses of the business. Depreciation expenses and investment tax credits are among the business expenses allowed by the Internal Revenue Service, but not considered appropriate in determining gross income for calculating child support.
If a parent is voluntarily unemployed or underemployed, income may be imputed so that parent based upon his or her recent work history, occupational qualifications and prevailing job opportunities and earnings levels in the community. If there is no recent work history, potential income may be imputed based upon a 40-hour workweek at minimum wage. No income will be imputed to a parent who is physically or mentally incapacitated or who is caring for a child who is under the age of three years and for whom the parents owe a joint legal responsibility.
Certain adjustment to the parents' monthly gross incomes are allowed if they have pre-existing child support obligations or responsibility for other children. The amount of child support payments made by a parent under a court order or separation agreement (for a child who is not involved in the action) is deducted from that party's gross income. Similarly, a parent with another natural child living in the home may deduct the amount of his/her financial responsibility for that child from his/her gross income. Responsibility for that other child is based on one-half of what the child support obligation would be for the party and the other responsible parent of that child. Once these amounts are deducted from the parents' monthly gross incomes, the basic child support obligation is then determined by the adjusted gross incomes.
The Schedule of Basic Child Support Obligation, which is included in the Guidelines, is based primarily on economic research of the patterns of expenditures on children. Once the basic support obligation is determined, certain credits are given for child care, health insurance payments and extraordinary expenses.
Health Insurance, Child Care Expenses and Extraordinary Expenses
The cost of health related insurance for the child is added to the basic support obligation. If the amount attributable to the child cannot be determined, the total cost is divided by the number of people covered and the individual cost is multiplied by the number of children for whom child support is being calculated. Medical and dental costs in excess of $100 per year and unreimbursed by insurance should be divided by the parents in proportion to their respective incomes. Child care costs incurred due to employment or job search and also added to the basic child support obligation.
In the discretion of the Court, extraordinary expenses may be added to the basic child support obligation. These expenses may included uninsured medical expenses in excess of $100 for a single illness or condition, expenses for orthodontia, dental treatments, asthma treatments, physical therapy, and uninsured chronic health problem, professional counseling and psychiatric therapy for a diagnosed mental disorder; expenses of attending a special or private elementary or secondary school to meet the particular educational needs of the child and transportation expenses for the child between the parents' homes.
Determination of the Presumptive Child Support Amount
The total child support obligation is calculated by adding the child care costs, health insurance costs and extraordinary expenses to the basic child support obligation. The non-custodial parent's obligation is determined by multiplying the total child support obligation by his or her percentage of combined adjusted gross income. The non-custodial parent receives credit for the amount of child care costs, health insurance premiums and extraordinary expenses that they pay out-of-pocket. The resulting amount is the child support obligation owed to the custodial parent.
Deviation from the Guidelines
Upon its own motion or upon a motion from either party, the Court may deviate from the Guidelines in cases where application of the Guidelines would be inequitable to one of the parties or to the child. Detailed information on the parents' income and expenses and the reasonable needs of the child are required for a party requesting a deviation from the Guidelines.
Child Support and Visitation
Child support and visitation are totally separate issues. Some non-custodial parents withhold child support unless they get the visitation they want. Likewise, many custodial parents deny the non-custodial parent visitation unless they pay child support. Parents need to resolve these issues separately and not at the expense of the children, who are the ones who suffer when child support is not paid or visitation is denied.
If you have any questions regarding the information in this article, please call Cynthia McAlister at (919) 250-2168 or cmcalister@smithdebnamlaw.com, Jeff Ellinger at (919) 250-2172 or jellinger@smithdebnamlaw.com or Rose Stout at (919) 250-2169 or rstout@smithdebnamlaw.com.
Raleigh The Landmark Center 4601 Six Forks Road Suite 400 Raleigh, NC 27609 919-250-2000 Fax 919-250-2100 Charlotte The Rotunda Building 4201 Congress Street Suite 460 Charlotte, NC 28209 704-643-3220 Fax 704-643-3898
