MGMT 108 Chapter Notes - Chapter 38: Legal Personality, Fiduciary, Double Taxation
Document Summary
An llc is a hybrid that combines the limited liability aspects of a corporation and the tax advantages of a partnership. Like corps, llcs must be formed and operated in compliance with state law. The owners of an llc are called members and have limited liability however it is possible to pierce the corporate veil. Llcs are legal entities separate from their owners. As a legal person, the llc can sue or be sued, enter into contracts, and hold title to property. People who are forming a contract may enter into contracts during the process of incorporation but before the corporation becomes a legal entity (called pre-incorporation contracts) Courts have tended to regard these entities as citizens of ever state of which their members are citizens. The state citizenship of an llc can come into play when a party sues the llc based on diversity of citizenship. The liability of members is limited to the amount of their investments.
