Limited Liability Company

The LLC, or Limited Liability Company, can be defined as an unincorporated company that is a cross between a corporation and a partnership. The owners of an LLC are referred to as “members”. The LLC is a business structure that allows owners to pay business taxes on their individual income tax returns like partners (or, for a one-person LLC, like a sole proprietor). With an LLC you simultaneously achieve the goal of pass-through taxation of business profits and limited personal liability for business debts.

Listed below are some of the characteristics of an LLC:

  1. Limited Liability. Limited liability is governed by state law;
  2. Members are not personally liable for the debts and liabilities of the LLC;
  3. Pass-through taxation. The LLC is treated like a partnership – or, for a one-member LLC, as a sole proprietorship;
  4. Can elect S status with the IRS;
  5. Can be formed by one or more people; and
  6. Normally managed by its members but can be manager managed.

This list is not all inclusive and you are encouraged to check with your financial advisor or legal counsel to insure that forming a limited liability company will be sufficient for your business needs.