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What is a Limited Liability Company (LLC)?
A Limited Liability Company (often called an "LLC") is a form of business organization that joins the other more traditional forms of business organization including "corporations," and "partnerships." Like these other business forms, an LLC is a legally recognized entity which is organized for the purpose of engaging in business. The LLC form of business organization offers certain unique advantages not available with the other forms of business organization.
One or more individuals can join together to engage in business as an LLC. The owners of an LLC are called "members." Members essentially own the LLC much in the same way as partners own a partnership and shareholders own a corporation. When an LLC engages in business activities, it is the LLC itself which actually owns and operates the business from a legal sense. In most situations, the debts and obligations of the business engaged in by the LLC are not the personal responsibility of the member(s). Of course, if a business operated by an LLC has financial difficulties, each member of the LLC could lose the amount of his or her investment in the LLC, as well as the equity built up in the business. Beyond this, however, no member risks the loss of his or her personal assets and income.
An LLC can be organized to combine several of the best features of the other forms of business organization. An LLC provides its member(s) with limited personal liability for the obligations of the business. Its income is not taxed to the LLC, but is instead "passed-through" to the member(s) and taxed to them at their individual tax rates in the same manner as the income of a partnership is taxed. The LLC form also allows great flexibility to its member(s) - not just in terms of who can be a member and who can manage, but also in terms of the way the members are allowed to "share" the profits, income, and equity of the LLC among themselves.
Hopefully, this brief overview will be of help to you in considering the LLC as a viable business option
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