“The right to associate with others in pursuit of a wide variety of political, social, economic, educational, religious, and cultural ends is an important component of freedom.”

- Roberts v. United States Jaycees, 468 U.S. 609 (1984)

Introduction:

Explore the key differences between LLCs and PMAs. Learn how each structure operates, their benefits, and how they can complement each other. Gain insights to determine the best fit for your business or organization.

LLC* or PMA (part I)

*Or other type of corporation, DBA, Sole Prop, or Publicly Registered Biz

When this topic comes up, I always hear the song, “whatever you can do, I can do better…” but it’s “whatever an LLC can do, a PMA can do better…”

Granted, everything has its place. It doesn’t have to be a competition

But let’s explore a little bit of the nuance between the two - and if you already have an LLC or registered biz, we will explore how the two could work together (in Part II).

Here are ten main differences between an LLC and a PMA:

1. Legal/Lawful Structure:

- LLC: A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

- PMA: An organization formed by private contract among its members, based on the rights of association, assembly, and expression. It operates for the benefit of its members and outside the scope of certain public regulatory controls.

2. Purpose:

- LLC: Primarily operates to conduct business, generate profit, and provide limited liability protection to its owners..

- PMA: Exists to serve the interests, beliefs, or activities of its members, which can include a wide range of purposes from social, religious, health, to educational, often not primarily focused on profit-making (let’s shift short-sighted profit into a more inclusive and holistic perspective of prosperity).

3. Regulation and Oversight:

- LLC: Subject to state laws and regulations, including public registration, reporting requirements, and taxation.

- PMA: Operates under the principles of private contract and association, claiming a degree of exemption from public regulatory oversight, under the premise it does not engage in public commerce.

4. Taxation:

- LLC: Can choose its tax status (as a disregarded entity, partnership, or corporation), but generally subject to income, employment, and sometimes sales tax.

- PMA: May argue for tax-exempt status based on its activities not being commercial but instead falling under charitable, religious, or educational categories, depending on jurisdiction and specific circumstances.

5. Liability Protection:

- LLC: Provides limited liability protection to its owners against the company's debts and liabilities.

- PMA: Liability protection for members and officers varies significantly depending on how the PMA is structured and operates.

6. Ownership and Members:

- LLC: Ownership is typically defined by membership interest (in terms of shares of the company’s assets), which can be outlined in an operating agreement.

- PMA: Members join based on an agreement to the association's charter or bylaws, not necessarily an ownership interest in the association's assets (resources).

7. Formation:

- LLC: Requires filing articles of organization with a state agency and compliance with specific state regulations.

- PMA: Formed through private contracts among its members without the need for filing with the state, although some may choose to incorporate or register for certain benefits.

8. Governance:

- LLC: Governed according to its operating agreement and state law, typically by its members or designated managers.

- PMA: Governed by its members according to its charter or bylaws, which can be more flexible and tailored to the members' agreement.

9. Public vs. Private:

- LLC: Operates in the public sphere, engaging in commerce, and is subject to public laws and regulations.

- PMA: Operates in the private domain, primarily engaging in activities for the benefit of its members, not the general public.

10. Legal and Tax Recognition:

- LLC: Widely recognized and accepted as a legal entity for conducting business, with clear legal and tax implications.

- PMA: Its status, especially regarding tax and regulatory obligations, may be more subject to interpretation and could be challenged by authorities, depending on its activities and how well it adheres to the principles of a private membership association.

If you are curious how a PMA could work for you, it’s important to hear your specific needs and vision to create a unique strategy that works best for you. Message us to set up a time to connect, or schedule a call HERE

Stay tuned to Part II to see how these two can work together!