What Is a Limited Liability Company (LLC)?
A Limited Liability Company, commonly referred to as a LLC, is a legal entity that is formed at the state level to separate a business owner from his or her business. Like a corporation, the owners of a LLC are not personally liable for the debts of a properly formed and maintained LLC. Like a partnership or sole proprietorship, an LLC has operating flexibility and is a pass-through entity for tax purposes. This means that the profits of the LLC are passed through and taxable to the owners of the LLC unless the LLC elects to be taxed as a Corporation.
A limited liability company (LLC) is a sort of hybrid form between a partnership and an S corporation – it has the liability protection of a corporation, with the advantage of being treated as a partnership. All profits and losses flow through to the individual owners’ income tax forms. An LLC is simpler to establish and maintain than a corporation. A Certificate of Organization and a docketing statement must be filed with the state. This is a popular form for many new small businesses.
Limited liability companies (LLCs) have been generating a lot of buzz in the news lately — and for good reason: where the corporation fails, the LLC prevails. Think of the LLC as a merger of the partnership and the corporation, except it has the best of both worlds — all the good qualities of each and none of the bad. It offers full limited-liability protection to all the owners (like the corporation), yet has a pass-through tax status (like the partnership). In addition, the LLC has a second layer of liability protection that shields the business from any personal lawsuits that may befall you. And it doesn’t stop there! The list of benefits goes on and on. LLCs are relatively new entities. Therefore, they aren’t so easy for some folks to understand at first. Even if you’re familiar with corporations — or partnerships, for that matter — you still need to understand some new concepts and a few new terms. The best and most basic way to understand an LLC is to think of it as a regular par
An LLC is a form of business entity that is separate and distinct from a person, like a corporation. The LLC is often described as hybrid between a corporation and a partnership. It allows for the limited liability protection similar to that of a corporation (i.e. your risk is limited to the amount that is invested in the LLC, and personal assets beyond that are usually protected). It also allows for a more flexible setup and operating structure like a general partnership (much more simple and flexible than a corporation) while providing the pass through taxation of a general partnership (if a multimember LLC) or that of a sole proprietorship (if a single member LLC). One of the main advantages of an LLC over a general partnership or a sole proprietorship is the Limited Liability protection. LLCs have long been a traditional form of business structure in Europe and Latin America. LLCs were first introduced in the United States by the state of Wyoming in 1977 and authorized for pass-thr
What Is a Limited Liability Company (LLC)?