The LLC - Limited Liability Company

Limited Liability Companies(LLC) have been around for many years in such countries as South America and Germany. The LLC first came to America in 1977 in Wyoming.

Evidence of LLC legislation in other states around the country did not take place until the IRS made a key ruling on the taxation of this new structure. On September 19, 1998, the IRS issued Revenue Ruling 88-76, stating that LLC's would be taxed as partnerships even though none of the members (partners) or managers would be personally liable for any of the company's debt. This ruling encouraged other states to adopt this new vehicle as well. Now, all states have accepted LLCs into their domain as legitimate business structures.

The LLC structure is commonly used for holding real estate.  One reason is that LLC structures are similar to partnerships, limited partnerships, “S” corporations, and trusts.  An LLC is a flow-through entity. It passes all of the LLC profits and losses directly to the members of the LLC. Individual members are therefore taxed at their personal income tax rates.

An LLC can also be handy when exploring joint ventures. For example, let's say you are enjoying the benefits of controlling your own corporation, and you now want to combine efforts with another individual by forming a joint venture. If each company was a corporation you could form a separate LLC and have the members (owners) be the two current corporations.  This was you don’t have to disrupt your current businesses and will be able to run those businesses exactly how you want without the other person getting involved.  This is a simple way to bring two corporate entities together and keep at arms length from the business at hand.

 

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