About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

23 Land & Water L. Rev. 523 (1988)
The Wyoming Limited Liability Company: A Viable Alternative to the S Corporation and the Limited Partnership

handle is hein.journals/lawlr23 and id is 533 raw text is: COMMENTS The Wyoming Limited Liability Company: a Viable Alternative to the S Corporation and the Limited Partnership? The passive loss rule promulgated in the Tax Reform Act of 19861 materially alters the relative tax advantage offered by various Wyoming business structures including the limited liability company (LLC). The impact of this new rule raises the question whether the LLC now provides adequate advantage over some of these other business forms, particularly the S corporation and the limited partnership, to justify its increased use by Wyoming businessmen. This comment explores that question and discusses how the applica- tion of the new rule, combined with limited liability, may result in some tangible advantages to the LLC under certain circumstances. BACKGROUND In 1977, the Wyoming state legislature enacted the Wyoming Limited Liability Act (Act) thereby creating a new and discrete business entity known as a limited liability company (LLC).2 In simplest terms, the LLC can be described as a business form much like a partnership, complete with partnership tax advantages, yet providing liability protection for its members similar to that provided by a corporation. The new business form has not yet been widely accepted by the busi- ness community.3 Only twenty-six Wyoming LLCs existed in 1988.4 The Wyoming legislature created the LLC in response to a perceived need for an entity bearing less tax burden than the C corporation' yet 1. Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085 (1986). 2. Wyoming Limited Liability Company Act, 1977 Wyo. Sess. Laws ch. 158, § I (codi- fied at Wyo. STAT. §§ 17-15-101 to -136 (1977, Rev. 1987)). 3. In 1982, Florida legislators followed Wyoming's lead and created a similar type of limited liability company. Florida Limited Liability Company Act, FLA. STAT. ch. 608.401-471 (Supp. 1987). Their purpose in doing so was to promote a belief that the LLC would attract foreign business and capital to the state by providing a format similar to the South and Central American Limitada. In theory, South and Central American business- men would flock to the new structure. Preliminary studies and committee reports had indi- cated a favorable climate for the entity. However, despite these projections, the limited lia- bility company has not been particularly well received in that state either. Only two limited liability companies were actually formed within the first year after the enabling legislation was passed. Comment, The Limited Liability CompanyAct 11 FLA. ST. U.L. REv. 387,387-88 (1983). A similar type of limited liability company was proposed in Alaska but failed to be passed into law. Id at 387. 4. Telephone conversation with the Wyoming Secretary of State on February 22. 1988. 5. In reference to a corporation, the terms S or C pertain to its tax status. The S cor- poration avoids C corporation double taxation by qualifying as a small business corpora- tion. I.R.C. § 1361,1366 (1982).

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most