Definition of limited liability company

Answer 1

A limited liability company (LLC):

• is a type of business ownership combining several features of corporation and partnership structures
• is not a corporation or a partnership
• may be called a limited liability corporation, the correct terminology is limited liability company
• owners are called members not partners or shareholders
• number of members are unlimited and may be individuals, corporations, or other LLC's

A limited liability company is a corporate structure whereby the members cannot be held personally liable for the company's liabilities or debts. The laws that govern vary in different jurisdictions. It is similar to a corporation in some respects but not all. If you are interested in forming an LLC you should consult with an attorney who specializes in business law.

In general, limited liability is a type of liability that cannot exceed the amount that has been invested in a partnership or limited liability company. Limited liability protects personal assets from the risk of being seized to satisfy creditor's claims, debts and other obligations. For privately or publicly held corporations, a shareholder's responsibility for the company's debts is limited to the par value of paid up shares. The company itself as a legal entity is liable for the rest.

Answer 2

LLC History

The limited liability firm is a triumph of comparative law in action. The origin of this relatively new institution is generally attributed to the German law of 1892, authorizing the Gesellschaft mit beschrnkter Haftung... . While drawing some inspiration from the English practice of the private limited company, it was nevertheless an original creation. However, the claim that it was without precedent is negated by the fact that the State of Pennsylvania had enacted a law in 1874 authorizing the limited partnership association, which was extensively used. This form of business organization, as we shall note later, bears a striking resemblance to the limited liability firm current today in Europe and Latin America. Eder, Limited Liability Firms Abroad, 13 Univ Pitt L Rev 193 (1952).

LLCs are neither new nor strange to the business community in the civil law countries of Europe and Latin America. This business form has its origin in the 1892 German company law known as Gesellschaft mit beschrnkter Haftung (GmbH). German not only was the first civil code country to enact this legislation, but Germany's enactment became the discussional focal point for the countries which subsequently adopted this commercial enterprise. Molitor, Die Auslandisch Regelung der G.m.b.H. und die deutsch Reform, (1927); and 12 Zeitscrift fur auslandisches and internationales Privatrecht 341 (1938).

Once established in Germany, the concept of the LLC had a very active and fast growth. Success in Germany soon caused the German model act to become the focus of extensive debate. Within a short period of time after enactment in Germany, the following countries joined the limited liability bandwagon: Portugal (1917); Brazil (1919); Chile (1923); France (1925); Turkey (1926); Cuba (1929); Argentina (1932); Uruguay (1933); Mexico (1934); Belgium (1935); Switzerland (1936); Italy ( 1936); Peru (1936); Columbia (1937); Costa Rica (1942); Guatemala (1942); and Honduras (1950). In France, by the late 1940's, the limited liability entity known as "societes de responsabilite limitee" was more popular than the more traditional stock corporation and comprised approximately one-third of all French societes. Eder, Limited Liability Firms Abroad, 13 Univ Pitt L Rev 193 (1952).

In addition to the limited liability, the LLC laws of each of the above countries have the following four basic characteristics which distinguish this entity from other business forms: (1) all require some use of the word "limited" in the entity's name; (2) the entity is given full juristic personality; (3) the partnership concept of "delectus personae," permitting a member to control admission of new members to the entity; and, (4)codes that allow limited liability firms to be dissolved by death of a member, unless otherwise expressly stated in the articles of association; in addition, some provide for probate or sale of a deceased's share. Eder, Limited Liability Firms Abroad, 13 Univ Pitt L Rev 193 (1952); for additional information on foreign LLCs, see Devries & Juenger, Limited Liability Contract; The GmbH, 13 U Pitt L Rev 193 (1952) and Bagts, Reforming the "Modern" Corporation: Perspectives from the German, 80 Harv L Rev 23 (1980).

In the United States, several states passed legislation creating entities similar to the LLC. In the last quarter of the nineteenth century, Pennsylvania, Virginia, New Jersey, Michigan and Ohio enacted legislation permitting "limited partnership associations" or "partnership associations." These associations were created to provide a form of limited liability coupled with some of the beneficial characteristics of the partnership association. Burke and Sessions, The Wyoming Limited Liability Company: An Alternative to Sub S and Limited Partnerships, 54 J Tax'n 232 (1981). The enabling legislation for these associations requires that either the principal office or place of business be located in the enacting state. As a consequence of this restrictive legislation, these associations were not attractive to many entities active outside of these localities. They have not been used extensively.

In 1977, Wyoming became the first American state to enact a true LLC act modeled after the 1892 German GmbH Code and the Panamanian LLC. The Wyoming LLC Act permits the formation of LLCs organized for any lawful purpose execpt the business of banking and insurance. Wyo Stat §17-15-103. In addition to limited liability, the Wyoming Act has the same four basic characteristics of the European and Latin American codes that distinguished this entity. First, WYoming requreis a form of the word "limited" in the entity's name. Second, the entity is given full juristic personality. THierd, the partnership concept of "delectus or intuitus personae" which permits a partner to control addmission of new partners to the partnership is present. Fourth, Wyoming's Act provides that LLCs must be dissolved by death of a member and provides for probate or sale of a deceased's share. In addition, the Wyoming Act contains a provision that excludes members or managers from litigation involving the business. Most LLC acts have followed this lead.

Answer 3

The maximum liability of the owners - stockholders - of a corporation is the amount they invest in it. They are not liable for any of the debts of the corporation even if the corporation has only one stockholder. Loans to or debts of the corporation are not debts of its management or its owners.

Answer 4

A Limited Liability Company (LLC) is a business structure allowed by state statute that is similar to a corporation, however, owners have limited personal liability for the debts and actions of the LLC. Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities, and "single members". There are, however, a few types of businesses that cannot be LLCs, such as banks and insurance companies.

Answer 5

There is no such thing as a 'limited-liability corporation'. A 'limited liability company' is an unincorporated organization that is treated as a separate entity from the members (equivalent to stockholders of a corporation) but is ignored for tax purposes. A single member limited liability company is treated as if the income is that of the member. A multiple member limited liability company is treated as a partnership. Unless the LLC chooses to be taxed separately as a corporation.

Limited-liability companies enjoy the benefits of limited liability while being taxed like a general partnership. Owners' net income is taxed at an individual personal rate rather than at the rate of a corporation

Answer 6

Limited Liability Companies (LLCs) are provided for in State statute. Generally, an organizer of a LLC is required to file an application/declaration with the State corporations authority, and to maintain the LLC by filing annual reports as specified in State statute.

LLCs function

(1) to limit the liability of the organizers by creating a separate creature of law, more simply than organizing a corporation, and for greater liability limitation than certain partnerships (other than limited liability partnerships [LLPs] and limited liability limited partnerships [LLLPs]); and

(2) to take advantage of pass-through income tax laws allowing members of the LLC to report tax information accruing to the LLC on their personal income tax returns (the result of an election for pass-through taxation), a prerogative not available to corporations.

Answer 7

The wordings of term Limited Liability Company or LLC are very self explainatory. The owners of the company have limited liability for the action of the company formed by them. In most of the situation the owners' liability is limited to their invetment in the company. This protection to owners is lost if there is some fraud or misappropriation..