Finally, in 1988, the Treasury announced that an entity could be taxed as a partnership even if none of the owners were personally liable. Later that year, it issued a ruling that Wyoming LLCs would be classified as a partnership for federal tax purposes. As other states enacted LLC laws, the distinction between LLCs and corporations became blurred. So, the Treasury issued regulations in 1996 that permitted almost all LLCs with two or more members to be classified as partnerships. Uses LLCs are suited for entrepreneurial businesses with a small number of active investors.
All members can enjoy limited liability protection while participating in the business.
The LLC is also useful for family businesses that want to maintain control within the family, obtain the liability protection ant tax benefits of a limited partnership, and restrict the transfer of voting rights outside the family. The state tax treatment of LLCs in states where the LLC will conduct business should be considered, since a few states impose franchise or other taxes on LLCs. Nevada and Wyoming, however, impose no state taxes on LLC income. Benefits An LLC is designed to incorporate the best aspects of corporations, general partnerships, limited partnerships and other entities. It provides a single tax at the ownership level.