24 September 1997 External T.I. 9642195 - TENNESSEE LLC (CORPORATE STATUS?)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Is a Tennessee limited liability company a corporation for purposes of the Income Tax Act?

Position:

Yes.

Reasons:

It is a separate legal entity.

964219
XXXXXXXXXX Jim Wilson

Attention: XXXXXXXXXX

September 24, 1997

Dear Sirs:

Re: Tennessee Limited Liability Company

This is in reply to your letter of December 16, 1996, wherein you forwarded a copy of the Tennessee Limited Liability Company Act ("Tennessee LLC Act") and requested our views as to the tax status in Canada of a limited liability company ("LLC") created thereunder.

We are of the opinion that a company formed under the Tennessee LLC Act would be a corporation for purposes of the Income Tax Act (the "Act") and, in particular, for purposes of the definition of a "foreign affiliate" in subsection 95(1) of the Act. As stated in paragraph 2 of Interpretation Bulletin IT-343R, "a corporation is an entity created by law having a legal personality and existence separate and distinct from the personality and existence of those who caused its creation or those who own it". The fact that the Tennessee LLC Act provides the flexibility for one or more specific members of the LLC to be personally liable for its liabilities does not affect this determination.

In accordance with Interpretation Bulletin IT-392, the Tennessee LLC is considered to have a capital stock consisting of 100 issued shares and each owner of a beneficial interest in the LLC is then considered to own a number of shares proportionate to his beneficial interest in the LLC. Each amount distributed on account of profits by the Tennessee LLC to its owners will be considered dividends for the purpose of the Act and the Regulations made thereunder.

If the Tennessee LLC is treated as a partnership for the purposes of the Internal Revenue Code (the "Code") such that the shareholders ("partners") rather than the LLC are liable to tax under the Code on the income of the LLC, such LLC will not be considered to be a resident of the U.S. pursuant to paragraph 1 of Article 4 of the Canada-U.S. Income Tax Convention.

The foregoing comments represent our general views with respect to the subject matter of your letter. As indicated in paragraph 22 of Information Circular 70-6R3, this is not an advance income tax ruling and is therefore not binding on Revenue Canada, Taxation.

Yours truly,

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch