Series 24: Limited Liability Companies

Limited Liability Companies

Another new addition to the corporate structure in the United States is the Limited Liability Company (LLC). A limited liability company is not a separate tax entity like a corporation, but what the IRS calls a “pass-through entity.” Profits and losses “pass through” the business to the LLC owners. Like a partnership, business income and losses are reported on the owners’ personal income tax returns. Like a corporation, all LLC owners are protected from personal liability for business debts and claims.

The LLC first materialized in the United States in 1982, when the state of Wyoming passed legislation developed by an oil and gas exploration company to create an unincorporated entity with limited liability and partnership status for tax purposes. After 1988 when the IRS