New Limited Liability Company Legislation in New York

On July 26, 1994, Governor Cuomo signed legislation which will permit limited liability companies to be formed in New York State. When the law became effective October 24, 1994, New York was the 42nd state to enact an LLC statute. The limited liability company (“LLC”) is a new form of doing business which combines the advantages of a partnership's flow-through tax treatment and operating flexibility with a corporation's limitation on liability for shareholders. The LLC is potentially useful for businesses in which the owners desire limited liability, flow-through tax treatment, and control over management. LLCs are particularly well-suited for foreign investment, venture capital, joint venture, real estate, oil and gas and high technology transactions, as well as for family-owned and other closely-held businesses. LLCs are not likely to be attractive when it is expected that the interest of the business will be widely-held or publicly traded, because flow-through tax treatment is unlikely to be available to such business