GENERAL FACTS ABOUT THE LIMITED LIABILITY COMPANY
For your information…
The Limited Liability Company (LLC) is a USA business structure that protects the owners from personal responsibility for its debts or liabilities.
Like corporations, an LLC is a separate and distinct legal entity. Therefore, an LLC can get its own a tax identification number, open a bank account, and do any legal business under its own name.
The LLC is a newer business structure than the corporation, and it provides several benefits to its members. LLCs are governed by the individual states and are recognized in all states. It is not exclusive of smaller or new companies. Many well-known companies are allegedly structured as LLCs or have LLC companies as part of their ownership structure like: Amazon.com LLC, Google LLC, Pepsi, IBM, Nike, or Sony to name some.
While the limited liability feature is like that of a corporation, the availability of flow-through taxation to the members of an LLC is a feature of a partnership rather than an LLC, which is one of the most attractive features of the LLC.
The LLC is a relatively new business form in the United States, although it has existed in other countries for some time. For centuries, the choices for a business entity were one of these three: a sole proprietorship, partnership, and corporation. Then the LLC was invented in 1977 by Wyoming state to fill a new need of businesses that wanted to be organized and taxed like partnerships but gain protection from liability the way that a corporation does. Florida followed with its own LLC statute in 1982.
But in 1988, the IRS finally issued a ruling that an LLC in Wyoming would be treated as a partnership for tax purposes. This allowed the taxable profits and losses of an LLC to flow through to the LLC’s individual owners; unlike a typical corporation, an LLC would not be taxed as a separate business organization.
After the ruling, nearly every state in the United States enacted an LLC statute, and the LLC now is a widely recognized business form.
Although LLCs and corporations have some similar features, the basic terminology associated with each type of legal entity, is different. When an LLC is created, it is said to be “organized”, not “incorporated”. The founding document is known as its “articles of organization,” instead of its “articles of incorporation” or its “corporate charter”. Internal operations of an LLC are further governed by an “operating agreement,” instead of the bylaws. The owner in an LLC is known as a “member,” and not a “shareholder.”