An LLC is a creation of statute. An LLC can be formed and exist as a matter of law only if a state statute enables the creation of LLCs. Unlike a partnership, an LLC can neither be implied at law nor exist by estoppel. An LLC is an entity that is an unincorporated association and that has a duration that is not perpetual. In most states, an LLC can be formed by one organizer but it must have two or more members. The District of Columbia statute requires two or more members while Virginia and Maryland have enabled the formation of single member LLCs. A member can be a natural person, a corporation, a partnership or another LLC.
If the proper election has been made, the LLC will be classified as a partnership and not subject to corporate income tax for both federal and state income tax purposes. An LLC can be formed for any business purpose as long as the purpose is a lawful one. The members may limit the powers of the LLC or restrict how the powers are exercised as long as the limit or restriction is contained in the articles of organization. If no such limit or restriction is contained in the articles of organization, then the LLC may possess and exercise all powers that are necessary or convenient to carry out the business purpose of the LLC.
The District of Columbia, Maryland and Virginia statutes expressly confer limited liability on the members of the LLC. A member of an LLC is not a proper party to a cause of action against the LLC except where another member is asserting a right against the LLC or the LLC is asserting a right against a member or where the cause of action is a derivative action.
Unlike a partnership under the Uniform Partnership Act (UPA) that is in effect in many states, the LLC may acquire and hold property in the name of the LLC rather than in the names of the members. Also, unlike a partnership, an LLC can sue or be sued in its own name. A member can sue the LLC in a derivative action to the same extent and under the same conditions that a shareholder can sue a corporation.