Because the IRS would not codify the federal tax treatment for LLCs, other states hesitated to enact legislation similar to the Wyoming statute, and existing LLCs remained in the dark. In 1988, the IRS ruled that the attributes of the company in question would determine its tax classification. The IRS identified four characteristics to use in its determination; a company having two or less of these features equaled a partnership, while more than two equaled a corporation. In 1997, the IRS revised its ruling by eliminating the company attribute test and pronounced that any noncorporate enterprise could self classify for federal tax purposes.
All LLCs are created through state statute. The Wyoming LLC Act allows the creation of LLCs for any legal purpose except for the business of insurance or banking. The enterprise must abide by several conditions to fulfill the statutory requirements of formation. The enterprise must include a form of the word “limited” in its name, exist as a separate legal entity distinct from its members and submit a completed Articles of Organization to the Wyoming Secretary of State. The act also contains provisions that protect members/managers from litigation and specifics regarding the dissolution of the LLC in the event of the death of a member.
By 1997, all 50 states and the District of Columbia had enacted its own Limited Liability Company Act, according to the Washington D.C. Bar Association. But because each statute was developed and enacted by that state’s legislature alone, the considerable diversity among the 51 statutes affected many interstate aspects of LLC activities, specifically the acknowledgment of out-of-state LLCs and the relationship between states and foreign LLCs.
In 2000, the Wyoming State Legislature enacted the Close Limited Liability Company statutes. An attempt to improve upon the more general Wyoming Limited Liability Company Act, the new statutes provided greater restrictions on some LLC actions but often relied on the original LLC Act to fill in gaps where the new laws remained silent and did not offer language promoting uniformity with other state laws.
In 1996, the National Conference of Commissioners on Uniform State Laws, in an attempt to address the inconsistencies of the different state LLC Acts, developed the Uniform Limited Liability Company Act. The NCCUSL recommended adoption of the ULLCA to the states to no avail. As the corporate climate changed throughout the years, the NCCUSL resolved to update the 1996 act and promulgated the Revised Uniform Limited Liability Company Act in 2006. In 2010, Wyoming’s state legislature enacted RULLCA, repealing its current Limited Liability Company Act.
- Limited Liability Company Reporter: LLC History
- The D.C. Bar: The Revised Uniform Limited Liability Company Act
- Utah Division of Corporations and Commercial Code: Considerations in Forming a Limited Liability Company
- Uniform Law Commissioners: A Few Facts about the Uniform Limited Liability Company Act (2006)
- Gonnella and Majors, PC: Planning with the Wyoming Close LLC Law
- The Advocate: The New LLC Act Preserves Idaho’s Traditions (pg. 16-18)