Limited Liability Companies

Abstract

Corporations and partnerships have traditionally served as the forms of organization from which business owners could choose. Recently, state statutes have begun to recognize a new form of business organization, the limited liability company (LLC). First recognized by state statute in 1977, the LLC is a hybrid organization that combines the advantages of the partnership with those of the corporation. In many ways, the LLC bridges the law governing both entities. Like the corporation, the LLC protects investors through limited liability equal to the amount they invest. The LLC is itself recognized as an entity with legal personality that can be the subject of debts and lawsuits, thus protecting the investors behind it. At the same time, as in a partnership, it is the investors, not the LLC, that are taxed directly, thus avoiding double taxation.