business currency limited-liability-company
How does a flow-through LLC own assets?
<p>A <a href="https://en.wikipedia.org/wiki/Limited_liability_company" rel="nofollow noreferrer">Limited Liability Company</a> (LLC) is a business under US law with the following characteristics:</p>

<ul>
<li>Establishes a "corporate veil" of limited liability, such that creditors or lawsuits can only go after the company's assets, and not personal assets of the owner(s).</li>
<li>Requires much less in the way of formalities than a corporation.</li>
<li>Treated as a <a href="https://en.wikipedia.org/wiki/Flow-through_entity" rel="nofollow noreferrer">flow-through entity</a> by default, meaning that the income of the company is treated directly as the income of the owner(s), rather than being held by the company and paid out as salary or dividends. (Not all LLCs operate as flow-through entities, but this question is only about those that do.)</li>
</ul>

<p>At first glance, it appears that the first and third points above are in conflict with one another:  if all revenue generated by the company flows directly to the owner(s) rather than being retained by the company itself, then the company has no money of its own with which to purchase company assets!</p>

<p>Obviously this has to be an overly simplistic understanding, but I'm having trouble finding a plain-English description of how it really works.  So my question is, what are the principles by which a flow-through LLC segregates company money and assets from flow-through payments to the owner(s)?</p>

<p>My understanding is that the "flow-through" treatment is specifically a tax law concept. The LLC has its own income, which it can use to pay expenses or acquire assets or for whatever other purpose, and such assets become the property of the LLC.  It's just that when it comes time to pay taxes, the LLC's net income is <em>taxed</em> as income to the owner.  But that does not mean that the LLC's income is treated the same as the owner's income in all other legal contexts.</p>

<p>You  are placing too much importance on "flow-through". It does not even belong on the same list as the others.</p>

<p>LLCs are <strong>defined by state governments</strong>.  They decide what an LLC is, what features it gets, and whether it can hold property. ("yes"). </p>

<p>When an LLC holds property, the title is held by the LLC. Period.  The state gets to decide that. </p>

<p>The IRS is a distant observer in all this.  Now when Congress saw the states setting up LLCs, they saw fit to implement an option for pass-through tax treatment on Federal taxes.  States followed suit, to keep taxes from being ludicrously complex. <strong>The Federal government does not define ownership rights</strong>.</p>
