The Limited Liability Company

The Limited Liability Company, or LLC, is a hybrid from of business organization that combines many of the forms and protections afforded to corporations with the features of a partnership.  Those who invest in LLCs are called “members.”  Just like corporations, LLCs provide liability shields for its members.  But LLCs allow for more flexible control and development of rules for the management of the LLC’s than do corporations.

LLCs can be managed by its members, in a member-managed LLC  (similar to a partnership), or by a single manager, in a manger-managed LLC (similar to a corporation).
As compared to a corporation, LLCs offer much more advantageous tax treatments.  The members or investors of the LLC are taxed once, like partners, on its profits, once those profits are earned.  Similarly, these same investors can take account of any losses of the LLC, as those losses are incurred, on their individual tax returns.  Thus profits and losses are said to “pass through” to their investors.
LLCs are legal entities and thus have filing requirements in order to form properly.  The formation of an LLC is most often quite simple, depending on the state in which you form the LLC.  Most require minimal amounts of information, some of which include: who the members are, an address, and a name for the LLC.  In most cases LLCs can be formed and filed in a day, but approval will take longer depending on the governmental entity which approves the formation.
One particular requirement of LLCs is that “Limited Liability Company” or “LLC’ must be part of their names.  This requirement by most legislatures implies that they allow entities who seek to claim the benefits given by the LLC and the LLC Act only when they properly identify themselves as a limited liability company.
Photo By: Galt Museum