What is an LLC?
LLCs (Limited Liability Companies) are a relatively new business form in the United States , though they have a long-standing history in Europe . LLCs were first formed in the United States in 1977, and were granted pass-through tax status by the Internal Revenue Service in 1988. As a result, LLCs can elect to be taxed like partnerships, with tax incurred only at the individual level when profits are paid as dividends.
An LLC or a Limited Liability Company is a separate legal entity (business structure) from the owners of the LLC. An owner of an LLC is frequently referred to as member. An LLC is frequently referred to as a hybrid of a corporation and a partnership. The members of a limited liability company are shielded from personal liability and profits and losses may pass directly to the members without taxation of the LLC itself.
An LLC (Limited Liability Company) is similar to a corporation in that it is separate from the owners of the business and is entitled to limited liability. An LLC is favorable in some instances because it entitles the owners to limited liability, plus it has less stringent corporate formalities, management flexibility and relaxed ownership qualifications. LLC’s are today’s entity of choice as they are better equipped for the common uses of entities today as opposed to the traditional uses of yesterday. See our “Education” page for further details.
An LLC (Limited Liability Company) is similar to a corporation in that it is separate from the owners of the business and are entitled to limited liability. An LLC is favorable in some instances because it entitles the owners to limited liability and avoids the “double taxation” of a corporation. Although an S-Corporation also affords these same benefits, an LLC has less stringent corporate formalities, management flexibility and relaxed ownership qualifications.
A Limited Liability Company (LLC) has characteristics of a corporation and a partnership. An LLC allows its owners not to be personally liable for debts or liabilities of the business like a corporation, but have the tax benefits of partnerships. The owners of an LLC are called members which are somewhat analogous to shareholders. A member can be a natural person, a corporation, a partnership, or another legal association or entity. Unlike corporations or sole proprietorships, which may be formed by only one person, in most states, LLC’s must be formed and managed by two or more members. The members may run the LLC themselves or through appointment of managers, who have similar levels of fiduciary duty to the LLC as do Directors of a corporation.
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?
