Explanation of LLC - What Does LLC Mean?
Even though LLC's have been around a while, some people thinking about starting a business may still be wanting an explanation of LLC laws and the answer to the
question: What does LLC mean, anyway?
An LLC is a limited liability company, which means that it provides protections to business owners and managers against personal liability. In
the United States, it is one of the newest business forms that a business startup may choose (much newer than, say, corporations, partnerships, sole propietorships,
etc.).
The laws surrounding LLCs were designed to provide the maximum flexibility, tax advantages, and liability protection
for business owners and managers there is.
It is important to understand that, while the term LLC is an acronym that has a generic definition (limited liability company), the
laws that govern LLCs vary from state to state. Therefore, what is true regarding LLCs in Michigan may not be the same in
Hawaii or Missouri. In fact, there is no real uniformity among the states with respect to the organization and operation of LLCs.
Therefore, if you plan on starting a business and using the LLC business form in any state, you should do research and seek an
explanation of LLC laws particular to your state.
History of the LLC in the United States
The first state to adopt a limited liability company act was Wyoming, in 1977. Although the law was designed to provide special benefits
to the oil and gas industry in that state, its broad language allowed other business types to take advantage of this special business format,
as well. The only two industries prohibited from using the LLC format at that time were the banking and insurance industries.
Florida was the next state to follow, adopting a LLC law in 1982. It wasn't until the federal government got involved, however, and gave
Wyoming one of the most important benefits of the LLC, pass through taxation, that this business entity became widespread. Now, all fifty US
States have laws allowing for some type of LLC formation.
Looking for a further explanation of LLC? Click here to read about the benefits of LLC formation.
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