State Statutes Authorize The Formation Of Limited Liability Companies

1245 Words Jul 31st, 2014 5 Pages
State statutes authorize the formation of limited liability companies to operate as unincorporated entities with legal identities separate and distinct from their members. With Wyoming being the first state in the nation in 1977 to recognize LLCs as a legal structure for operating a business, all fifty states now have statutes authorizing LLCs.

Characteristics of an LLC
Limited liability companies possess characteristics of both partnerships and corporations. Like a partnership, an LLC is a pass-though entity for tax purposes. Many businesspeople find this feature particularly appealing because of the avoidance of double taxation. On the other hand, members of LLCs enjoy limited liability as do the shareholders of a corporation. Where owners of a corporation are called shareholders, the owners of an LLC are referred to as members. In most states, members may include individuals, corporations, and other limited liability companies. Like a corporation, most state statutes do not place a limit on the number of members comprising an LLC, and all fifty states allow for a single-person LLC, i.e., only one member.

The Supreme Court of Delaware made the following observation about limited liability companies:

The limited liability company ("LLC") is a relatively new entity [in 1999] that has emerged in recent years as an attractive vehicle to facilitate business relationships and transactions…. [It] is seemingly a simple concept – to permit persons or entities ("members") to…

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