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A relatively recent form of business allowed by state statute, Limited Liability Companies (LLCs) are popular because, as in a corporation, owne

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

rs have limited personal liability for LLC debts and actions. In addition, LLCs offer the benefits of partnerships, namely management flexibilit

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

and pass-through taxation.

In most states, LLC business owners - called members - may include individuals, corporations, other LLCs and foreig

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

entities, with no maximum number of members. Most states also permit "single member" LLCs. An LLC can be managed by either by the members or by

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

managers. Members can be compensated using distributions of profit or guaranteed payments. In addition, because LLC profits are considered earne

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

income, managing members can deduct 100 percent of the health insurance premiums paid--up to their pro-rata share of LLC' net profit.

Tax Trea

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ment

Referred to by the IRS as “pass-through entities,” unlike corporations, LLCs are not separate tax entities and do not pay federal income t

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

xes. Some states impose an annual tax on LLCs, but the number of members in an LLC makes a difference at tax time:

* Single-Owner LLCs – One-me

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ber LLCs are treated as sole proprietorships for tax purposes, which means the LLC itself does not pay taxes and does not have to file a return

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

ith the IRS Single-owner LLCs report profits or losses on Schedule C and submit it with their 1040 tax returns.

* Multi-Owner LLC – Multi-o

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ner LLCs are treated as partnerships for tax purposes, which means co-owned LLCs do not pay taxes on business income; the owners each pay taxes

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

on their respective shares of profits on their personal income tax returns (Schedule E).

Advantages of LLCs:

* Pass-through taxation.<

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

r>

* Avoids drawbacks of forming a corporation, such as double taxation.

* Limited personally responsibility for LLC debts and liabilities

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

* Few ownership restrictions.

* Management flexibility.

* Minimal annual paperwork and fewer formalities than corporations.

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

* Members must agree in writing to authorize increased ownership in an LLC.

* Customers may view LLCs as a more professional business entit

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

than sole proprietorships or partnerships

Interested?

Though some types of businesses (banks, insurance companies, and nonprofits, for ex

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

mple) usually cannot be LLCs, and special rules apply to foreign LLCs, most other businesses can become LLCs.

If you're interested, check your

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

tate's requirements and the federal tax regulations for further information. For information on filing LLC tax returns, dealing with employment

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

axes and possible pitfalls, refer to IRS Publication 3402, Tax Issues for Limited Liability Companies. Forming an LLC requires filing proper doc

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

mentation (or "articles of incorporation" or "certificate of incorporation") with the appropriate state agency, and payment of state filing fees

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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