Private membership associations (PMAs) have long been a popular choice for individuals seeking privacy, autonomy, and legal protection. Within the realm of PMAs, there are a few intriguing options that have gained popularity:
- The S-Corporation-Managed PMA
- The C-Corporation-Managed PMA
- The Partnership-Managed PMA
- The LLC-Managed PMA
- The Sole Proprietorship-Managed PMA
This unique organizational structure combines the benefits of a corporation, or a limited liability company (LLC), with the privacy, flexibility, and autonomy offered by PMAs. In this blog post, we will explore the concept of Corporation-Managed PMAs, and LLC-managed PMAs. Let’s delve into their key features, and shed light on their potential advantages for individuals seeking a robust structure and legal protection.
Let’s first talk about the basic business structures:
- LLC
- Maximum flexibility in how you manage and run your business
- Board of directors not required
- Unlimited owners (aka “members”) allowed
- You’re not personally on the hook for business liabilities
- Taxed once or twice; you choose which can help minimize taxes
- Ongoing filings and fees to stay in compliance
- LLCs can’t go public
- Another option is a LLP (Limited Liability Partnership) or a LP (Limited Partnership)
- Similar structure as above but with some differences
- S-Corporation
- Better for smaller corporations
- You’re not personally on the hook for business liabilities
- Taxed once, only shareholders pay on profits received
- Ongoing filings and fees to stay in compliance
- Must have a board of directors
- Strict rules about holding meetings (Meeting Minutes) and how to keep records
- C-Corporation
- Best for growth and planning to go public one day
- You’re not personally on the hook for business liabilities
- Unlimited owners allowed
- Recognized internationally
- Preferred by investors
- Taxed twice, business pays at the corporate level, and shareholders pay on income received
- Ongoing filings and fees to stay in compliance
- Must have a board of directors
- Strict rules about holding meetings (Meeting Minutes) and how to keep records
- Sole Proprietorship
- An easy set-up
- No paperwork to start; you may still need a DBA or business licenses to operate legally
- One owner max
- You’re personally on the hook for business liabilities
- Taxed once, you pay on profits in your personal tax return
- No personal liability protection
- Another option is a General Partnership
- Similar structure as above, except with two or more
What is an LLC or Corporation-Managed PMA?
An S-Corporation-Managed PMA or LLC-managed PMA, is a private membership association that is structured as a corporation, specifically an S-Corporation or a LLC. PMAs, in general, are associations formed by like-minded individuals who join for a common purpose, benefiting from legal protections, autonomy, and privacy. By incorporating as an S-Corporation or a LLC, PMAs can take advantage of the additional benefits and structure that come with these designations, which shields their personal assets from potential legal claims.
How Does an LLC-Managed PMA Work?
In an LLC-managed PMA, the PMA itself is traditionally organized with members, keeping business separate, and being connected to an LLC. The founding members of the PMA being the owners or members of the LLC. The LLC structure provides several benefits, such as flexibility in management, pass-through taxation, holding insurance, being able to adverstise, and limited liability protection. The LLC is managed by its members, who have the authority to make decisions, establish rules, and govern the PMA’s operations.
Key Features and Advantages of an LLC:
a. Enhanced Privacy: One of the primary advantages of an LLC-managed PMA is the heightened level of privacy it offers. The use of an LLC structure adds an extra layer of confidentiality, as the ownership and operations of the PMA are shielded from public scrutiny. This can be particularly appealing for individuals or groups seeking to maintain their privacy in sensitive matters.
b. Limited Liability Protection: By utilizing the LLC structure, members of an LLC-managed PMA can enjoy limited liability protection. This means that their personal assets are safeguarded in case the PMA faces legal issues or liabilities. The separation between personal and PMA related assets helps protect individuals from potential financial risks.
c. Autonomy and Flexibility: The LLC structure grants members of an LLC-managed PMA the ability to establish their own rules, regulations, and governance structure. This autonomy allows the PMA to tailor its operations to meet the specific needs and objectives of its members, fostering a sense of ownership and control.
d. Pass-Through Taxation: Another significant advantage of the LLC structure is pass-through taxation. This means that the PMA itself does not pay taxes on its income. Instead, the profits or losses pass through to the individual members, who report them on their personal tax returns. This simplifies the tax process and can potentially result in tax savings for the members.
Key Features and Advantages of Corporations:
a. Corporate Structure: An S-Corporation or Private Corporation-Managed PMA operates within the framework of a corporation. This structure provides a formal legal entity, which can enhance credibility, facilitate business transactions, and protect personal assets from potential liabilities.
b. Limited Liability Protection: One of the primary advantages of an S-Corporation or Private Corporation-Managed PMA is the limited liability protection it offers. The corporation’s separate legal entity shields individual members from personal liability in case of legal claims or financial obligations incurred by the PMA. This separation ensures that personal assets are safeguarded and the PMA’s activities do not impact members directly.
c. Governance and Structure: The corporate structure of an S-Corporation or Private Corporation-Managed PMA enables a clear governance framework. Members can establish bylaws, elect officers, and define decision-making processes, providing a formal structure for managing the PMA’s operations. This enhances accountability, clarity, and organizational efficiency.
d. Tax Benefits: S-Corporation or Private Corporation-Managed PMAs can benefit from potential tax advantages. S-Corporations offer pass-through taxation, meaning the PMA itself does not pay taxes. Instead, profits and losses pass through to individual members, who report them on their personal tax returns. This structure can result in potential tax savings and simplified tax filing.
Whether you choose an LLC-Managed PMA to a Corporation-Managed PMA, they represent a powerful choice for individuals and groups seeking a structured, legally protected, and autonomous environment. By combining the advantages of corporations with the privacy and flexibility of PMAs, this organizational structure provides a solid foundation for pursuing shared goals, protecting personal assets, and enjoying the benefits of limited liability.
By harnessing the potential of an LLC-managed PMA or a Corporation-Managed PMA, individuals and groups can enjoy a secure and confidential environment while pursuing their shared objectives with peace of mind.
ALWAYS RESEARCH what is the best option for you…
When considering the establishment of a PMA, it is crucial to have a consultation with one of our Consultants, please click here, so you can have a better understanding and a clear path on what is best for your Association.
Disclaimer: This blog post is for informational purposes only and does not constitute legal or tax advice. It is essential to consult with legal professionals experienced in corporations, LLC’s, and tax laws to ensure compliance and establish a legally sound structure.