What is an LLC?
Corporations are formed pursuant to state law and have shareholders, are managed by a board of directors, and the daily affairs are administered by officers. Similarly, a limited liability company (LLC) has members and may be managed by one or more managers. Most often, both entities must pay franchise taxes, but may have different federal tax liabilities. Generally, most people form corporations or limited liability companies in order to shield the shareholders or members and officers or managers from personal liability for the debts and obligations of the entity. There may also be various tax advantages to forming these entities which may not be available for sole proprietorships and general partnerships. You should always consult with private counsel before going forward.
An LLC is not a corporation or a partnership, but it has elements of these other forms of business organization. An LLC is treated as a corporation for purposes of limited liability and as a partnership, if properly structured, for purposes of taxation. LLC members can fully participate in management decisions, while remaining protected from personal liability. An LLC can be run by a manager or directly by its members. These qualities make LLCs more attractive to some business people as compared to partnerships or subchapter S corporations.
A Limited Liability Company (LLC) is similar to a corporation in that it is a business entity that is separate from the business’s owners. An LLC is favorable because it avoids the “double tax” of a corporation, yet also affords its owners the personal liability protection of a corporation. Other benefits of an LLC include less stringent state formality requirements, management flexibility and relaxed ownership qualifications.
Related Questions
- SHOULD THE SHARED OR FRACTIONAL OWNERSHIP USE A LIMITED LIABILITY COMPANY (LLC), OR LIMITED PARTNERSHIP (LP) OR LIMITED LIABILITY PARTNERSHIP (LLP)?
- ARE THERE ANY RESTRICTIONS ON A PHYSICIAN PRACTICING MEDICINE UNDER A LIMITED LIABILITY COMPANY (LLC) OR LIMITED LIABILITY PARTNERSHIP (LLP)?
- What is an LLC?
