What's the
Definition
of an LLC?. . . Setting
Up An LLC?
Definition:
LLC - Limited Liability Company
The basic
definition of an LLC is a business structure that is a hybrid of a partnership
and a corporation. Its owners are shielded from personal liability and
all profits and losses pass directly to the owners without taxation
of the entity itself.
By definition,
an LLC offers its owners the advantage of limited personal liability
(like a corporation) and a choice of how the business will be taxed,
making particularly popular with small businesses.
Partners can choose for the LLC to be taxed as a separate entity (again,
like a corporation) or as a partnership-like entity in which profits
are passed through to partners and taxed on their personal income tax
returns.
Although state
laws governing creation of LLCs and IRS regulations controlling their
federal tax status are still evolving, because of their flexibility
LLCs are increasingly regarded as the small business legal entity of
choice.
HISTORY OF A LIMITED
LIABILITY COMPANY (LLC)
Limited
Liability Companies are a relatively new legal entity in the United
States, though they have a long history in Europe. The use of LLC's
started in 1977. It was granted pass-thru tax status by the IRS in 1988.
All 50 states now recognize and allow the formation of an LLC.
Setting Up an LLC:
Basic Characteristics
A limited
liability company (LLC) is a business entity created by statute. It
has some characteristics of a partnership and some characteristics of
a corporation particularly an S corporation.
The owners are called "members." There are no shareholders
in an LLC.
One or more members have to be designated to organize a limited liability
company (LLC).
Management of the limited liability company is vested in its managers.
Without an agreement to the contrary, all of the members are managers.
A written operating agreement may designate one or more of the members
as managers.
Limited liability companies are fairly new.
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Our
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A limited liability company has the tax advantages of a partnership
and the limited liability advantages of a corporation.
Although the lack of precedent makes adopting this form of business
a little uncertain, experts predict that the limited liability company
will soon become the business form of choice for most small businesses.
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