Limited Liability Company - History, Formation, Structure, Operating Agreement, Membership Interests, Member Contributions, Liability, Records And Books
organization noncorporate business llc
A noncorporate business whose owners actively participate in the organization's management and are protected against personal liability for the organization's debts and obligations.
The limited liability company (LLC) is a hybrid legal entity that has both the characteristics of a corporation and of a partnership. An LLC provides its owners with corporate-like protection against personal liability. It is, however, usually treated as a noncorporate business organization for tax purposes.
Additional Topics
In 1988, the IRS 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 1988 IRS ruling, nearly every state in the United States enacted an LLC statute,…
The minimum information required for the articles of organization varies from state to state. Generally, it includes the name of the LLC, the name of the person organizing the LLC, the duration of the LLC, and the name of the LLC's registered agent. Some states require additional information, such as the LLC's business purpose and details about the LLC's membership and managem…
The owners of an LLC are called members and are similar in some respects to shareholders of a corporation. A member can be a natural person, a corporation, a partnership, or another legal association or entity. Unlike corporations, which may be formed by only one shareholder, LLCs in most states must be formed and managed by two or more members. LLCs are therefore unavailable to sole proprietors. …
State law and an LLC's operating agreement or articles of organization provide the circumstances under which a person may be admitted as a new member. These circumstances vary. Usually the admission of a new member requires the consent of existing members, and in most cases the consent must be unanimous. In some cases the articles of organization do not allow for admission of new members. I…
Members of an LLC contribute capital to the LLC in exchange for a membership interest. There is no minimum amount of capital contribution, and members usually can contribute cash, property, or services. By default, the total amount of a member's capital contribution to an LLC determines the member's voting and financial rights in the LLC. In other words, unless an LLC's operat…
State LLC statutes specifically provide that members of an LLC are not personally liable for the LLC's debts and obligations. This limited liability is similar to the liability protection for corporate shareholders, partners in a limited partnership, and partners in a limited liability partnership. Under certain circumstances, however, a member may become personally liable for an LLC'…
The IRS developed a system for determining whether an LLC was formed more like a corporation or more like a partnership. Under prior regulations, if the IRS determined that the LLC's operation was more similar to a corporation, the LLC is taxed as a corporation, meaning that both the LLC and its members were taxed. Specifically, the IRS observed whether the LLC had such characteristics as l…
Members may withdraw from an LLC unless the operating agreement or articles of organization limit their ability to do so. A member must usually provide to the LLC written notice that he or she intends to withdraw. If a withdrawal violates the operating agreement, the withdrawing member may be liable to the other members or the LLC for damages associated with it. State law frequently sets forth the…
Most states provide for the continuation of an LLC after the disassociation or withdrawal of a member. Continuation after a member's disassociation usually requires the remaining members' unanimous consent. Some states require that the articles of organization or operating agreement allow for the continuation of the business after a member's disassociation. Some states allow a…
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