The venture business in the United States as such began to take shape in the middle of the 20th century. Its goal was to close the gap that existed between science and industry. An important role in the development of venture business in the United States was played by government support, which was expressed in the creation of a special infrastructure, preferential lending, and measures aimed at the development of venture activities. At the same time, the legislator recognized the American LLC as a form of a legal entity, which is the most suitable for the functioning of a project company. This fact contributed to a significant increase in the number of new companies in the USA which adopted the startup model.
Today LLCs are quite widespread and gaining increasing popularity in various sectors. In particular, they are used as static legal entities – asset holders, as opposed to operating companies directly involved in the business process (Mancuso, 2019). LLCs are also actively used by persons who carry out licensed activities, including doctors, lawyers, and auditors (Mancuso, 2019). They create a kind of professional limited liability company (PLLC), choosing the LLC form because of its relative freedom of management. Importantly, the presence of limited liability is determined by the advantage in resolving issues of liability for professional errors. However, the creation of a form such as PLLC is allowed not in all states; for example, in California, the establishment of PLLC is prohibited (Mancuso, 2019). Additionally, the combination of the advantages of limited liability of company participants with the relative freedom of organizing internal management constitutes an advantage for startups and new companies.
Essentially, LLC is a legal entity that combines partnership, corporation, and sole proprietorship properties. Figuratively speaking, a limited liability company is a full-fledged legal entity that can be created by one or more persons. Thanks to these properties, LLCs has become the most popular form of activity for startups. In addition, LLC members have the right to choose according to what mechanisms the organization will be taxed and determine the requirements for a corporation, which is quite rare in practice. Thus, being an effective form of entity both on economic and legal planes, LLC status become a reason for the growth of the number of startups and new companies in the USA since gave them enough space for launching their activity.
Reference
Mancuso, A. (2019). Form your own limited liability company: Create an LLC in any state. (11th ed.). NOLO.