Limited Liability Companies – LLC Basics

The LLC, or as it is officially known the Limited Liability Company, is indeed fairly new to the United States. In fact, in 1977, Wyoming became the first state to enact a limited liability company statute. Some people think that the first might have been an Nevada, LLC, or a Delaware, LLC. But they would be wrong. In this area of law, we have Wyoming to thank for importing the notion of a the limited liability company into this country. how to create an LLC in Florida

The term “import” in the previous sentence begs a question. If this type of company was imported, where did it come from? The answer might surprise you. The notion of a LLC originated in Germany in 1892. Once this type of limited liability company was established in Germany it spread essentially worldwide with the interesting exception of the United States.

This is not to say that some states were not working on a marriage between partnerships and corporations to allow some form of limited liability. Pennsylvania, Virginia, New Jersey, Michigan and Ohio were experimenting in this regard. However, it was Wyoming that in 1977 became the first American state to enact what we would refer to as a true limited liability company Wyoming has and is still leading the way with respect to new forms of entities that may be used in a business context. The most recent development is the Serial LLC which originated in Wyoming and has now spread to five other states. (More on Wyoming’s leadership in this regard will be addressed in later articles). The Wyoming LLC was patterned after the German 1892 code as well as the Panamanian and other Latin American forms of limited liability company.

As a result, the Wyoming Limited Liability Company Act contains the same four requirements as the acts require in other countries: 1) The word “limited” must appear somewhere in the name of the company; 2) the entity enjoys fully jusristic personality; 3) a partner or partners have control over whether to admit additional partners; and 4) the LLC must dissolve upon the deal of a member and provides for the probate or sale of the deceased share. This has been modified in many states to allow the parties to continue the business if they desire).

We often speak in terms of LLC’s being fairly new. Perhaps compared to corporations such a statement may be accurate. However, Limited Liability Companies have been used in many countries for the better part of a century to assist their owners in risk management, risk planning and asset protection.