History of LLC or Limited Liability Company :
LLC stands for
Limited Liability Company. In 1977,
Wyoming was the first state to pass the law to form LLC in the United
States. Five years later in 1982,
Florida followed suit and adopted the formation of LLC. Twenty years after Wyoming passed law
allowing the formation of LLC for the first time in history, every state had
passed law to allow formation of LLC in the United States.
Who Benefits From a Limited Liability Company
or LLC?
The LLC is formed to
provide a legal entity which caters to small businesses. Unlike corporations,
LLCs provide both liability protections and tax benefits. LLC is commonly adopted by small companies to
confer these benefits. The lawmakers
encourage the formation of LLC as it promotes economy and creates jobs on
states level.
No Double Taxation in LLC:
A LLC is formed with
one or more members. In single-member
LLC, the individual’s assets and business assets are one and the same for tax
and legal purposes. In another words, in
both single-member and multi-member LLCs, all corporate gains and losses are
treated and taxed as individual income of the members. This prevents “double
taxation” where the members are being taxed for his or her personal income as
well as the company’s income. However,
this is not the case for business formed under sole proprietorships or
partnerships.
Protects Personal Assets of the members of
LLC:
Sole Proprietorship
vs LLC:
Many individuals
operate as sole proprietors where individual’s assets and business assets are
one and the same as far as the legal and tax purposes concern. However, unlike in LLC, businesses operated
under this entity are at risk of personal property, such as his/her home and
personal savings being seized to pay business debts in case of a business
crisis. However, the members in
businesses operated under LLC, gain the benefits of investing without risk of
personal losses beyond the amount of their individual investments
