Tax Aspects of Limited Liability Companies

The limited liability company (LLC) is gaining popularity and may become the major way of doing business for nonpublic companies. An LLC can be viewed as: 1. a general partnership where the partners have no personal liability, 2. a limited partnership where there is no general partner, and 3. a partnership surrounded by a corporate shell. In comparing an LLC with a limited partnership, a limited partnership must have at least one general partner who has unlimited liability for partnership debts. However, with an LLC, every member has limited liability. Members of LLCs can participate in management and retain their limited liability. The Wyoming LLC statute was the first statute passed in 1977. In Revenue Ruling 88-76, the IRS concluded that a company formed pursuant to Wyoming\u27s statute was a partnership for Federal tax purposes. The entity was created to own, operate, and improve real property. With respect to liability, no members or managers were liable for LLC debts beyond their capital contributions