Limited Liability Company

Limited Liability Company in United States

Plain-English Law

Limited Liability Company as defined by Nolo’s Encyclopedia of Everyday Law (p. 437-455): A business ownership structure that offers limited personal liability for business obligations and a choice of how the business will be taxed: either as a separate entity or as a partnership-like structure in which profits are taxed on the owners’ personal income tax returns.

Closing a Loophole that Enables Foreigners to Hide Behind Anonymous Entities Formed in the United States

The Treasury Department and Internal Revenue Service (IRS) issued in May 20016 proposed regulations closing a loophole in U.S. laws that has allowed foreigners to hide assets or financial activity behind anonymous entities established in the United States. The rule will require foreign-owned entities that are “disregarded entities” for tax purposes, including foreign-owned single-member limited liability companies (LLCs), to obtain an employer identification number (EIN) with the IRS. These entities represent a narrow class of foreign-owned U.S. entities that have previously had no obligation to report information to the IRS or to get a tax identification number, and thus can be used to shield the foreign owners of non-U.S. assets or non-U.S. bank accounts. The proposed rule will strengthen the IRS’s ability to prevent the use of these entities for tax avoidance purposes, and will build on the success of other efforts to curb the use of foreign entities and accounts to evade U.S. tax. See tax evasion.