Limited Liability Company
Brief Overview of Limited Liability Companies
Introduction
Limited Liability Company (LLC) is often considered as the hybrids of general partnership and corporation. It often referred as a general partnership where the partners have no personal liability and a limited partnership where there is no general partner or a partnership surrounded by a corporate shell (Seipel, Tunnell & Zimmermann, 1995). The LLC is first adopted in Wyoming in 1977 and then in Florida in 1982. However, LLCs weren’t popular entities in the beginning due to its hybrid nature that IRS had yet to decide how it was going to be taxed. Finally, in 1988, Revenue Ruling 88-76 was issued. IRS confirmed that LLCs would be taxed as partnership. In the following years after the adoption of the public ruling, the explosion of LLC laws started across the nation. States began to form their own version of LLC laws, and the National Conference of Commissioners on Uniform State Laws also issued a Uniform Limited Liability Company Act. With the development of the legislature, the public became to have a better understanding of the LLC’s organization and tax structure and began to form more of them. In addition, the 1997 release of “check-the-box” regulations that simplify the tax filing process of LLCs further boosted its popularity (Bishop & Keatinge, 2009). At the same time, as LLCs were more commonly used in different states and industries, case law built up, which provided public a more solid idea of LLC’s legal limitations. Now, after three decades since its formation, LLC has become one of the most favorable entity types.
Basic Features of LLCs Limited liability companies continue to grow in popularity as a choice of business entity due to the statues of LLCs as “hybrid entities” that combined the most desired characteristics of corporations and partnerships. The "owners" of an LLC are referred to as "members". Depending on the state, the members can consist of a single
Introduction
Limited Liability Company (LLC) is often considered as the hybrids of general partnership and corporation. It often referred as a general partnership where the partners have no personal liability and a limited partnership where there is no general partner or a partnership surrounded by a corporate shell (Seipel, Tunnell & Zimmermann, 1995). The LLC is first adopted in Wyoming in 1977 and then in Florida in 1982. However, LLCs weren’t popular entities in the beginning due to its hybrid nature that IRS had yet to decide how it was going to be taxed. Finally, in 1988, Revenue Ruling 88-76 was issued. IRS confirmed that LLCs would be taxed as partnership. In the following years after the adoption of the public ruling, the explosion of LLC laws started across the nation. States began to form their own version of LLC laws, and the National Conference of Commissioners on Uniform State Laws also issued a Uniform Limited Liability Company Act. With the development of the legislature, the public became to have a better understanding of the LLC’s organization and tax structure and began to form more of them. In addition, the 1997 release of “check-the-box” regulations that simplify the tax filing process of LLCs further boosted its popularity (Bishop & Keatinge, 2009). At the same time, as LLCs were more commonly used in different states and industries, case law built up, which provided public a more solid idea of LLC’s legal limitations. Now, after three decades since its formation, LLC has become one of the most favorable entity types.
Basic Features of LLCs Limited liability companies continue to grow in popularity as a choice of business entity due to the statues of LLCs as “hybrid entities” that combined the most desired characteristics of corporations and partnerships. The "owners" of an LLC are referred to as "members". Depending on the state, the members can consist of a single