What is a limited liability company?
A limited liability company is a hybrid legal entity, with elements of the structure of both corporations and of partnerships. Its organization is similar to a corporation, but it enjoys many of the operational and tax benefits of partnerships. While the limited liability company is a relatively new type of legal entity (first recognized in the U.S. in 1977), all 50 states and the District of Columbia have now passed legislation authorizing the creation of LLC’s.
Limited Liability Companies are a relatively new business form in the United States, though they have a long-standing history in Europe. First formed in the United States in 1977, and granted pass-thru tax status by the Internal Revenue Service in 1988, this business form currently is recognized in all 50 states. The LLC is a distinct business entity that offers a alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation. This means that LLCs can be taxed like partnerships, but only at the individual level when profits are paid as dividends. These earnings have a considerable advantage over C corporations, which are subject to double-taxation (once at the corporate level, and again at the individual level) when profits are paid as dividends to its Members (the equivalent of Shareholders in a Corporation). Similar to corporations, LLCs protect personal assets from business debt. However
A limited liability company, like a corporation, is a legal entity existing separately from its owners. A limited liability company is created when proper articles of organization (or the equivalent under the laws of a particular state) are filed with the proper state authority, and all fees are paid. State laws typically impose additional pre or post-creation requirements as well. A limited liability company is not a partnership or a corporation, but it normally combines the corporate advantages of limited liability with the partnership advantage of pass-through taxation.
A limited liability company, commonly called an “LLC,” is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.Like owners of partnerships or sole proprietorships, LLC owners report business profits or losses on their personal income tax returns; the LLC itself is not a separate taxable entity. Like owners of a corporation, however, all LLC owners are protected from personal liability for business debts and claims — a feature known as “limited liability.” This means that if the business owes money or faces a lawsuit for some other reason; only the assets of the business itself are at risk. Creditors usually can’t reach the personal assets of the LLC owners, such as a house or car. (Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.)A limited liability company (denoted by L.L.C. or LLC) in the law of many of the United States i
