Limited Liability Company (LLC)
What Is Limited Liability Company (LLC)?
A Limited Liability Company (LLC) is a business structure that combines features of corporations and partnerships. It provides legal protection to owners while allowing flexible management and tax options.
Owners of an LLC are known as members.
Why It Matters
An LLC protects owners from personal liability for business debts and obligations. This means personal assets are generally protected if the business faces legal or financial issues.
How LLC Works
An LLC is created by filing formation documents with the state.
Members manage the company directly or appoint managers.
LLCs may choose different tax treatments, including being taxed as a partnership or corporation.
Example
A small consulting business owned by two partners may operate as an LLC to limit personal liability.
LLC vs Corporation
- An LLC offers flexible management and tax options.
- Corporations have stricter governance structures.
FAQs About LLCs
Do LLC owners pay business taxes?
Many LLCs use pass-through taxation where profits pass to owners’ personal tax returns.
Can a single person form an LLC?
Yes. Single-member LLCs are common.
Do LLCs protect personal assets?
Generally yes, provided legal requirements are followed.
Related Terms
