A federal statute known as the Limited Liability Company Act of 1996 (LLC 1996) controls the creation and management of limited liability companies (LLCs) in the United States. It was implemented to offer an adaptable and effective corporate form that combines the benefits of a corporation and a partnership while reducing owner responsibility. The LLC 1996 was created with the intention of promoting entrepreneurship and economic progress by providing small firms with a more desirable organizational form.
An LLC is a distinct legal entity from its owners or members under the LLC 1996. This implies that the LLC has the authority to engage in business, own property, and enter into contracts in its own name. An LLC also shields its owners or members from being held personally liable for the debts and liabilities of the business. One of the main benefits of an LLC over a sole proprietorship or general partnership is that the owners are not subject to any limits on their personal liability.
The LLC 1996 has the additional advantage of offering a great deal of management and ownership structure flexibility. An LLC may be owned by a single individual or by a number of members. The LLC’s members have the option of managing it themselves or hiring managers to oversee daily operations. Because of this, the LLC is a very adaptable corporate form that can be tailored to the requirements of the owners.
The option to construct a series LLC is one of the LLC 1996’s most important features. With a series LLC, the owners can divide the business into distinct series or cells, each with its own assets, liabilities, and members. As a result, the owners are able to manage various investments or businesses within a single LLC while still having distinct legal liability protection for each series. Only a few jurisdictions, including Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah, and Puerto Rico, currently permit the creation of series LLCs.
In conclusion, the Limited Liability Company Act of 1996 (LLC 1996) is a federal law that gives small enterprises access to an adaptable and effective corporate structure. By providing a more appealing company structure that combines the benefits of a corporation and a partnership while limiting the liability of the owners, the LLC 1996 seeks to promote entrepreneurship and economic prosperity. An additional option provided by the LLC 1996 is the creation of a series LLC, which gives owners even more flexibility and security. If you’re considering creating a business, you should think about the LLC as a potential option and speak with a lawyer or tax expert to decide if it’s the best option for you.