The Limited Liability Company Act

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.

Although they have common themes, a state Limited Liability Company Act has a great deal of diversity. And along with diversity comes questions. May the limited liability company be formed and operated by only one owner? May it be formed for reasons other than to make a profit? Do owners have the right to withdraw from the company and still receive distribution of fair value of their interest? May these rules be waived or modified by agreement, or are they written in stone?

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.