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Every state has either adopted or is considering its own version of a Limited Liability Company Act. Wyoming initiated the nations first LLC Act in 1977. It was off to a slow start though; as it took the Internal Revenue Service ten years to finally announce that a LLC in Wyoming would be taxed like a partnership.
In case you are not aware of the allure that an LLC has, it has been described as having the ability to give a solo business organization the best features from all other types of businesses combined. If it has been properly structured, then the owners obtain a liability shield similar to a corporation, as well as the taxation benefits of a partnership. There is virtually no business enterprise for which a LLC would be inappropriate, except if the company is expected to be publicly traded or if there are so many members in the company that it cannot legitimately qualify for partnership tax. As a matter of fact, there are many different enterprises that would benefit from this type of structure, including real estate, oil and gas ventures, as well as businesses with foreign investors.
There are of course similarities in the themes and operation of a LLC, but recognition of out of state companies varies according to state. Also, the diversity can cause a lack of uniformity. It is this lack of uniformity, regarding a state Limited Liability Company Act, which brings many questions to mind. Do owners have the right to receive equal distribution after withdrawing from the company? Can this type of company be formed and operated by only one individual? Are the rules and guidelines absolute or may they be modified or waived by agreement?
A limited liability company is a legally distinct entity from its members, and as such, members are not normally liable for the debts, obligations and liabilities of the company. Members are not proper parties to suits against the LLC unless an object of the proceedings is to enforce members' rights against the company or to enforce their liability to the company.
The Internal Revenue Service decided that a one-member LLC will not be taxed like a corporation, nor will it be taxed as a partnership, since it only has one owner. Whether or not forming a LLC would best suit an individual depends on the local state directives, as well as each unique case. A Limited Liability Company Act allows even one individual to form a company, allowing sole proprietors to claim the benefit of a liability shield. The one-member LLC is disregarded for Federal taxation purposes, using the return of a single owner.
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