The Limited Liability Company or LLC has been a traditional form of business structure in Europe and Latin America. The LLC was first introduced in the United States by the State of Wyoming in 1977 and authorized for pass-through taxation (similar to partnerships and "S" Corporations) by the IRS in 1988. With the recent inclusion of Hawaii, all 50 states and Washington, D.C. have now adopted some form of LLC legislation for both domestic and foreign (out of state) Limited Liability Companies. 

Many business professionals believe the Limited Liability Company presents a superior alternative to corporations and partnerships because the LLC combines many of the advantages of both. With an LLC, the owners can have the corporate liability protection for their personal assets from business debt as well as the tax advantages of partnerships or "S" Corporations. It is similar to an "S" Corporation without the IRS' restrictions.

Advantages

• Protection of personal assets from business debt 

• Profits/losses pass through to personal income tax returns of the owners 

• Great flexibility in management and organization of the business

• The LLC does not have the ownership restrictions of an "S" Corporation making them ideal business structures for foreign investors

• If you are the only member of an Limited Liability Company, you can elect to file a "Schedule C" as part of your personal tax return.

Disadvantages

• The LLC often has a limited life (not to exceed 30 years in many states). Some states require at least 2 members to form an LLC, and LLCs are not corporations and therefore do not have stock and the benefits of stock ownership and sales. However, Delaware only requires the LLC to have one member.

As with the "S" Corporation listing, these lists are not inclusive. For more detailed information, please be sure to speak with a qualified legal and/or financial advisor. You may address your questions to our  Tax and Accounting Services at tax@delawarecorp.us.