While corporations and labor organizations are generally prohibited from making contributions in connection with federal elections, the Federal Election Campaign Act (the Act) and Commission regulations permit them to set up political committees, which may raise funds permissible under the Act in order to make contributions to and expenditures on behalf of federal candidates and other committees.
Federal election law refers to a corporate- or labor organization-sponsored political committee as a “separate segregated fund” (SSF), though it is more commonly called a “political action committee” or PAC. As the name implies, money contributed to an SSF is held in a separate bank account from the general corporate or union treasury.
The connected organization
A corporation or union that sponsors an SSF is called the connected organization.
The connected organization may also exercise control over its SSF. Corporations and unions often adopt bylaws to govern their SSFs, though bylaws are not required under the law and do not have to be filed with the FEC except when requested.
Limited liability companies and SSFs
An LLC that elects to be treated as a corporation by the Internal Revenue Service (IRS) or that has publicly traded shares will be treated as a corporation under FEC regulations and, therefore, may serve as the connected organization for an SSF.
An LLC that elects to be treated as a partnership by the IRS is treated as a partnership under FEC regulations and therefore may generally make contributions and form a nonconnected committee (rather than an SSF).
LLCs that elect to be treated neither as partnerships nor as corporations by the IRS are treated as partnerships according to FEC regulations. Regarding LLCs and contribution limits, see Contributions from partnerships and LLCs.