Though it bears similarities to both, a limited liability company (“LLC”) is neither a corporation nor a partnership. Therefore, the owners of an LLC are not a shareholder or a partner. Rather, they are called members. Nevertheless, you can find in an LLC the combination of the best characteristics of a corporation and a partnership. An LLC’s member can be any person, partnership, other LLCs, corporations or other foreign entities.
What is an LLC to those who are quite concerned with taxes? What is an LLC’s advantage over the other types of business forms? Just like a corporation, a limited liability company offers its owners protection from any personal liability from the business debts. What makes it better is that it is a pass-through entity with regard to tax, something a corporation is not. Being a pass-through entity means it can pass through to its owners the company’s profits as well as losses. They will then reflect these on their personal tax returns just as it is done in a partnership or a sole proprietorship. Just like with partnerships, LLCs provide greater flexibility for the company’s management.
A limited liability company can have as many members as it wishes to have. The laws of each state even allow LLCs with only one owner, called “single member.” Forming an LLC does not require bylaws, meetings and the meetings’ recording just like in a corporation. Instead, an Articles of Organization should be filed with the Secretary of State in order for the LLC to be set up. This Articles of Organization should be according the state’s particular guidelines. Along with this, pertinent fees should also be paid. This process makes an LLC a statutory creation.
What is an LLC’s history? When did it come about? LLCs can be considered to be new in the United States’ business scene since its popularity came about only in the 1990s. However, LLCs already existed in Europe way before that. It was formally adopted in Wyoming’s legislature in 1977. Acceptance was not immediate, in fact it was slow. However, it snowballed in the 1990s when all states passed statutes allowing the formation of LLCs.