Limited Liability Company
LLCs in the U.S. combine simplicity, flexibility, and significant tax advantages. With no double taxation and easy management, they are the ideal gateway for entrepreneurs and foreign companies looking to expand successfully.
Introduction
The State of Wyoming was the first State to regulate the Limited Liability Company (“ Limited Liability Company”) -and its acronym in English comes the abbreviation LLC Company- and its legislation dates back to 1977. All the states of the Union have progressively developed similar legislation, and today, LLC Companies are implemented in all fifty states of the Union and in the District of Columbia .
In the mid-nineties, the IRS granted this type of companies the benefit of fiscal transparency, a principle that allows the partner of the company to pay taxes only on the benefits they receive as a partner , without the company paying taxes as a company as such, since the benefits are directly attributable to the partner, and all of this regardless of the status of the partner, whether an individual or legal entity and whether or not they are a resident of the United States.
The LLC Company , due to its legal flexibility and especially the tax treatment granted by the IRS, has become a convenient and beneficial company model for foreign individuals or legal entities that conduct business in the United States.
Constitution and Registration
An LLC is incorporated in the State where it is to be established , by submitting and registering with the Department or Secretary of State what in an LLC are called Articles of Organization (” Articles of Organization”).
The Articles of Organization must first include the name of the company, which must be accompanied by the words “Limited Liability Company ”, “L.L.C.” or “LLC”.
In an LLC, the Manager is called the Manager (“Manager”). The Manager may appoint a President, Secretary, and Treasurer . The Partner—who in LLCs is called the Member (“ Member ”)—may be appointed Manager, whether an individual or legal entity.
Once the Articles of Organization of the company have been registered, the Manager or Managers constitute themselves as a Board and in a Minutes the acts of constitution and registration are ratified , the Directors of the company are appointed, who are usually the President, Secretary and Treasurer, and finally, the Members of the company are appointed. This document, called the Minutes of the Organizational Council (” Written Consent to “Organize” is the first Board Minutes that initiates the organization and operation of the company.
The Minutes are a private document that is not recorded in any public registry. Based on the Organizational Council Minutes, the Manager or Managers issue Share Certificates to the Company’s Members of Membership Agreements (the “Membership Agreements “), which represent each Member’s percentage of interest in the company and are also private, non-registrable documents.
Finally, the Manager or Managers approve, and certify this in the Minutes, the company’s operating bylaws. The Bylaws in the LLC Company are called the Operating Agreement (“ Operating Agreement”). The Operating Agreement, in accordance with State law, regulates the Directors (duties, remuneration, appointments, vacancies, dismissals, convening, notification, quorums and voting of board meetings), Shareholders’ Meetings (ordinary and extraordinary meetings, location of the meeting, notification, quorum, voting and representation), Corporate Minutes and Financial Statements, Distribution of Profits, Shareholdings and Amendment of the Bylaws.
Operation
The day-to-day administration of an LLC is carried out by the Manager(s), who meet in a Board of Directors when the company comprises several Managers. The Manager(s) may appoint a President, Secretary, and Treasurer to represent the company in the various roles generally assigned to the President, Secretary, and Treasurer.
In an LLC, it is not mandatory to appoint a President, Secretary, and Treasurer, as the company may be represented simply by the Manager(s). The Members of an LLC meet annually at the Ordinary General Meeting and also whenever an Extraordinary General Meeting is called.
The Bylaws regulate ordinary and extraordinary meetings, the venue of the meeting, notice, quorum, voting, and representation. When the identification numbers of the Manager(s) and the Members of the company match, the company may hold Board of Directors in lieu of General Meetings, and these Boards are granted the same validity and legal binding force as Member Meetings.
LLCs must file their Annual Tax Return before April 15 of each year , but may request an additional five-month extension before that date to comply with this tax obligation.
