LLC Definition
An LLC is a limited liability company. This type of company is formed by filing paperwork with the state in which it will do business. An LLC offers its owners protection from personal liability for the debts and obligations of the business. This means that if the LLC owes money or is sued, the owners’ personal assets are not at risk.
An LLC can be owned by one or more people, and can be managed either by its owners or by hired managers. The management structure of an LLC is specified in its operating agreement. Most states have default rules for LLCs that do not have an operating agreement in place.
An LLC has several advantages over other types of businesses. These advantages include:
– Limited liability for owners: As mentioned above, owners of an LLC are not personally liable for the debts and obligations of the business. This protects their personal assets in the event that the business is sued or cannot pay its debts.
– Pass-through taxation: An LLC is not taxed as a separate entity. Instead, all profits and losses are ‘passed through’ to the owners and reported on their individual tax returns. This saves time and money because there is only one tax return to file for the entire business.
– Flexible management structure: As mentioned above, an LLC can be managed either by its owners or by hired managers. This flexibility allows businesses to choose the management structure that best suits their needs.
